Many organisations such as the Central Bank, OECD and EU have flagged the uncertainty and vulnerability being faced globally and the impact that this has upon economic growth and consumer sentiment. This uncertainty is reflected in a decline in consumer sentiment in this wave of Reflecting Ireland.

In this economic environment, having a strong  understanding of finances or financial literacy is crucial as it helps individuals to feel more in control, and make effective decisions that can protect and improve their financial wellbeing. Despite growing access to financial tools such as online resources and services, many still face barriers to understanding finances. What challenges are the Irish public facing when it comes to their finances and how does this translate into how we manage our money?

Understanding of basic finances

• Over 90% believe they have an average or high level of financial literacy, with the remainder believing they have a low level of understanding.
• (58%) demonstrated an understanding of inflation and the effect it has on household purchase power.
• Over 55s and those from higher socioeconomic households are significantly more likely to believe they have a high level of financial literacy. 18–24 year-olds are significantly more likely to believe they have a low level of financial understanding.When presented with a question taken from Junior Certificate Business syllabus, just under six in ten
• When it comes to DIRT, only one in five (22%) correctly calculated how DIRT is applied to savings.
• Over half of adults believe they have a good or excellent understanding of common financial products and services such as debit cards (71%), credit cards (58%), insurance (57%), mortgages (55%), fixed term savings accounts (50%) and inflation (50%).
• While more than two in five have a below average understanding of more complex financial products and terms such as diversification of risk (52%), stocks and shares (48%), and compound interest (45%).

Finances and technology

• Technology (digital banking, AI) has helped more than two in five better understand fees and charges (48%), financial products available (47%) and personal spending habits (46%).
• Six in ten 18–24-year-olds have used tech to help them better understand their spending, this is significantly higher than all other age groups.
• Over 55s are significantly less likely to have used technology to help understand finances better.
• More than one in four (27%) would be comfortable receiving AI-generated advice on how to better manage their money, a slight increase compared to last year (24%).
• 63% say that while AI might be capable of analysing their spending patterns, they are more comfortable with talking to a human about it. While there is a clear preference for human interaction this is a significant decline compared to this time last year (70%). There are other signs of people becoming more comfortable with AI with significant drops in fear of more sophisticated financial fraud (61%) down from 72% last year.

Emotional and psychological factors impacting financial literacy

• Most people associate savings with a feeling of security (26%), safekeeping (23%) or control (16%).
• Females and the squeezed middle (35–54-year olds) are most likely to associate savings with feeling more calm / less anxious.
• People perceive the biggest barriers to improving financial literacy as understanding ‘financial jargon’ (51%), feeling overwhelmed (48%), too complicated (38%) and a lack of motivation (36%. Those who have a low level of financial literacy are significantly more likely to say feelings of embarrassment (40%) are their biggest barriers to a better understanding of finances.
• Women are more likely to feel overwhelmed by finances, while under 25s are more likely to lack motivation or feel embarrassed.
• If given €1,000 in the morning, over half (55%) would save it, 5% would invest in their pension, with the remainder saying they would spend it.

Attitudes towards finance

• Seven in ten are confident in their ability to manage a household budget; however, significantly less are comfortable talking about money issues with family members/friends (53%) or anyone else (41%).
• 45% of people believe with the cost of living so high, trying to save seems pointless, while more than one in two (55%) do see the merit in putting money into a savings account.
• When it comes to long-term finances the Irish are less confident, a third (32%) would rather spend money to enjoy themselves now than save for the future while just over a third have a clear long-term financial plan (38%) or believe they will be able to afford the lifestyle they want into retirement (36%).

Spending and saving behaviours

• It appears our attitudes towards finances have changed across the generations, particularly when it comes to money privacy. Whilst we still prioritise saving for a rainy day, talking about money appears to be less stigmatised now versus when we were children.
• Three in four people follow good financial habits of checking statements/transactions (84%), making note of upcoming bills (75%) and setting up automatic payments for regular outgoings (75%).
• While setting budgets can help people monitor their income and expenses, a third (32%) say they ‘often spend more’ than their budget while a further 1 in 10 (12%) ‘always spend more’.
• The number one reason for overspending is things costing more than budgeted for (55%) followed by setting unrealistic budgets.
• One in ten do not save while a further one in five (16%) cannot afford to save.
• One in three (34%) save on a regular basis while a further two in five (38%) save on an ad-hoc basis.
• 25–34 year-olds are most likely to save a regular amount each month while 18–24 year-olds are more likely to save when they have the money to spare.

Mood of the nation

• Concern for economic outlook continues to rise, returning to levels seen in our mid-2023 research findings. Concern for Ireland has grown significantly since the start of the year with 56% saying Ireland is on the wrong track.
• Negative views on household finances over the past 12 months remains consistent with end of last year with two in five saying they are worse off compared to last year while over a third have seen no change to their financial situation. For the year ahead with two in five believing their personal circumstances will be the same this time next year with a further two in five saying it will be worse.
• While inflation in Ireland is showing signs of stabilising, the cost of living firmly remains the number one most important issue for many in Ireland. With the price of housing and access to healthcare making up the remaining top three biggest issues to be addressed.

Read the full #ReflectingIreland report

Read our blog on navigating the World of Finance