A recent study conducted by OP Financial Group's Economic Research shows that only 17% of Finnish people create and closely follow a budget for their finances, with more than half of the respondents having no financial plan whatsoever. Men in Finland, in particular, believe they have a better understanding of basic financial concepts. However, in a difficult economic situation, financial knowledge is crucial.
According to the research, 46% of Finns report creating a budget for their finances, but only 17% follow it closely. Meanwhile, 29% create a budget but do not track its implementation. Unexpected one-time expenses can complicate the finances of ordinary citizens, while we have seen in recent years that unexpected costs can be ongoing. Increases in prices and interest rates can erode one's financial situation, and being more intentional can help ensure that individuals can continue doing the things they have done in the past.
Harri Nummela, Retail Banking Director at OP Financial Group, notes, "We see that a significant number of Finns still live in a world of zero interest rates where the interest rate has not been adjusted to match the current rising rates. Therefore, now is a good time to create a budget." Women are more likely to be active budget planners, with 20% reporting that they create and follow a budget compared to only 11% of men. Young people between the ages of 18-24 are the most enthusiastic budget planners but the laziest in terms of following their budget. Meanwhile, retirees are the most careful budgeters and budget followers.
The study also found that a scarcity of resources motivates Finns to keep a tight budget, with low-income individuals being more likely to monitor their budget closely. This is understandable, but especially in these financial circumstances, it is crucial for high-income individuals to also consider their income and expenses. This does not necessarily mean reducing expenses, but it can help to understand one's financial situation better in case of a decrease in income or an increase in expenses.
When it comes to financial knowledge, the roles of men and women are reversed. A fifth of Finnish respondents said they understood inflation well, with 27% of men and 14% of women feeling confident in their knowledge. This gap widens even more when it comes to understanding mortgage interest rates, with 37% of men stating they have a very good understanding compared to less than 20% of women.
Nummela notes, "Studies show that men generally rate their knowledge of financial matters and many other subjects as superior to that of women. However, the worrying thing about these results is that young people rate their understanding of financial terms poorly. Even though they may not currently need to deal with issues such as mortgage interest rates, they have recently completed compulsory education where they should have been taught about financial matters."