2015 ─ Children and Finance: Research Summary

IN COOPERATION WITH:

МЕТОДОЛОГИЯ ИССЛЕДОВАНИЯ All-Russian poll among parents of children elder than 4 years

Focus groups with children and teenagers

•S ELECTION: 1600 people •M ETHOD: personal semi-formalized interview •N UMBER OF REGIONS: 4 0 •E RROR: 3,4%

– 2 groups with children from 7 to 11 years – 2 groups of children from 12 to 14 years – 2 groups of children from 15 to 17 years

All-Russian poll of children and teenagers •S ELECTION: 5000 of Russian pupils • At the base of “Financial Olympiad” of the Institute of stock market and management

Desk study • Analysis of Russian and international practice in the sphere of financial education as well as specific programs and financial products for children

2

CHILDREN AND FINANCE

FINANCIAL AWARENESS FOR CHILDREN: GLOBAL EXPERIENCE AND RUSSIAN PRACTICES Financial terms knowledge and ability to put them into practice give a person an opportunity to operate its financial resources intelligently and, as consequence, avoid risks connected with incorrect usage of different product and services as well as with ineffective strategies of financial behavior. In turn, high indexes of the financial awareness are one of the clauses of the financial sphere.

Currently, the public level of the financial awareness in the Russian Federation might be characterized as low: debt strategies predominate savings ones, consumers’ awareness of peculiarities of usage products and services is not high. That is why one of the most topic issues nowadays is the elaboration of widespread program of financial education. Mostly children and teenagers are in the risk zone on the issue of financial awareness. This is because of their parents who generally cannot share with them their financial knowledge, as they do not know enough in this sphere.

Nowadays, in many countries are implemented the programs of financial awareness enhancement of children and teenagers. There are organized either by the state’s institutes (e.g., on the national level by National Bank in Poland), or private companies which are the suppliers of financial services for their clients (e.g., Merrill Lynch, Wells Fargo, Charles Schwab), as well as non-governmental organizations in the framework of international events (e.g., CYFI).

Nevertheless, one of the clause of successful realization such programs is not just the support of them by government, non-governmental organizations, banks, insurance companies and other market players, but also the availability of products and services for children and teenagers, which would help to master the

strategies of responsible and literate behavior into the practice. World Bank has created the system of basic demands for such products, respecting of which allows to make them available to children and teenagers.

Their usage will act to raise financial responsibility and consumer awareness.

In many countries around the world there are products and services for children and there are even special bank departments which work with this audience. For instance, DBS Bank in Singapore has opened a department, the main purpose of which is to teach youths of the basics of financial planning. Rabobank in Netherlands offers 12-18 year old teenagers to open an account and to control it with mobile application or online account. The product has a variety of functions letting children conduct different financial transactions (payments, transfers), and gives an opportunity to start savings.

Currently, in Russia there are nearly not financial organizations offering similar services for youth audience.

The main activity of financial organizations designed to educate children, for example, by business games (Home Credit Bank, VTB24) or by specialized lectures and seminars (Alfa-Bank and others).

The situations of absence of global net of financial education working in every region and low or isolated activity of financial institutions in this regard creates the only source of information about financial products or services in Russia, which is a family or the nearest of a child. As it was highlighted above, today the Russians financial awareness remains quite low (pour information about products and services, irrational financial behavior), that reduces the likelihood for a child to obtain necessary knowledge and to develop budgeting skill in a family.

3

CHILDREN AND FINANCE

SPECIAL PRODUCTS AND FINANCIAL PLANNING FOR CHILDREN IN RUSSIA Lack of special products and necessity to come to other instruments, not always fitted to children audience (online cashes, bankcards attached to their parents’ cards) come to formation high-risk strategies behavior, which after reaching adult age may become leading for a customer.

75% of juveniles aged from 14 to 17 have their personal financial resources, most part of which (81%) comes to them from their parents as pocket money. Getting this resource is not always under some certain rules, whereby they can hardly plan their expenditures. Lack of control of financial resources leads to decrease in responsibility while waiting them.

77% of the Russians having children do not budget and 73% do not draw a child to planning family budget. Only one-third of parents (33%) constantly discuss with their children issues, connecting with money, economy and financials. From time to time, 29% of parents accomplish that. In addition, the research shows that discussing financial and economic issues perceives as common recommendations, touching money topic, choice of product or services (e.g., “you should spend less”).

Such lack of practice for children to budget and use different services becomes a risk factor in creation financial planning strategies. This attitude is characterized by willingness to save financial resources for major purchase (i.e. in a certain period of time), ability

to save and reserve only great sums of money, lack of willingness to get the money back, borrow from the closest and high buyer ability.

Children’s and teenager’s knowledge about financial products and services are not on the high level. Representatives of youth and children’s audience know almost nothing about saving, security or investment tools. A little higher are the level of awareness about cards and credits, however, as a rule, children’s knowledge may be characterized as incomplete, sometimes containing erroneous belief. At the same time, the research demonstrates that many children, especially in teenager age, easily adopt warnings about some financial products and services from immediate surroundings.

Children and teenagers often use different products and services, primarily, allowing them to conduct payments and transfers. Thus, more than 80% of teenagers, taking part in the research, have the experience of using different payment sources, where almost half of them shop in the Internet, preferring non-cash ways of payments.

Technical literacy of representatives youth audience let them use non-cash ways of payment actively. However, lack of skills of budgeting and necessary knowledge of how to manage personal money may result in unprofitable strategies of personal budget organization.

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AVAILABILITY OF OWN MONEY IN EVERYDAY PRACTICE Three fourth of minors (75%) at the age from 14 to 17 have their own money. With this boys more often than girls mention availability of own money – 81% against 70% respectively.

Do you have your own money? % of polled children and teenagers

25% no

75% yes

The main source of own funds for children is pocket money, which is given by the parents or other relatives (81%). At the same time 28% of pollees mentioned that they gain income from freelancing or permanent job. Some participants of the poll, as a rule, at the age of 16-17 as a source of income chose scholarship or other regularly paid benefits. Similarly to the case with availability of own funds distribution of sources of income differs between boys and girls. Thus, boys more often chose that they received money from permanent work or freelancing (37% in respect to 17% among girls).

Choose, please, all sources of your money for the last 6 months? % of polled children and teenagers

Total number of pollees

Pocket money

81

Freelancing, permanent job Other sources

78

28 4

86

37 3

17 6

The sum of replies exceeds 100% because respondents could choose several answers

Data, received in the course of the poll among teenagers complies with polls of parents: less than 40% of parents mentioned that they do not give pocket money to their children. The lowest figures were recorded in large cities with population from 500 thousand to 1 million people (from 58% to 64% depending on the size of the city). One of the reasons for such variations between types of cities may be perception of “pocket money” as a category. In large

cities consumer refer to pocket money, as a rule, money, which are given to children for their personal needs (entertainment, purchase of toys, etc.). In small cities all money, which the child gets, including money to buy food for the family, is regarded as pocket money.

Consumers from North Caucasian, South and Ural federal districts give money to their children more often – more than 70% of parents in these districts regularly or from time to time give them pocket money.

Do you give your children pocket money? % of polled parents of children elder than 4 years, across Russia in general, with a breakdown into federal districts and types of cities

29% yes, sometimes

}

Share of parents, which do not give their children pocket money

Moscow and Saint-Petersburg

38%

62%

no

33% yes, regularly

38

Across Russia, in general

33

From 1 mln. people

58

From 500 thousand people

64 31

From 100 thousand people From 50 thousand people

}

Up to 50 thousand people and urban type settlement Villages

21 34 38

Share of parents, which regularly or sometimes give their children pocket money

63% 63%

53% 79%

53%

42%

73% 79%

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CHILDREN AND FINANCE

ARSENIY, 12 years

ALEXEY, 13 years

«They give me money: washing of dishes – 100 rubles, washing of floors – 200 rubles. It is as if I have my own salary for my own actions.

Done homework – 10 rubles, because it is my duty. Tidying up my room – 500 rubles, if I did it right».

«Parents give money to add funds to the cell phone account or to buy something and I can leave 500 rubles for myself. I have saved already quite a lot of money, 15 thousand».

ANYA, 13 years «Before they also gave me money for me grades.

Now I ask for money if I need. They may give or they may not. It depends on their mood. And it depends on my grades in general».

SVETLANA, 17 years «I do not get money very easily, but from change you may also save money, you buy food and you leave change for yourself».

ALINA, 12 years

«I simply ask and my parents immediately buy it to me and that’s all. I have to put some efforts at schools during the week and get good grades».

«I get money for high grades. There was such a period when I became lazy and was getting low grades. And for my mother low grades are – Bs and Cs. Then my mother gave me money only for As. Now, of course, she does not give me money for that anymore. But I leave change».

Do you or someone else in your family write down expenses and income of the family? Which of the provided ways does more precisely describe practice used by you (by your family)?

Do you or someone else in your family write down expenses and income of the family? Which of the provided ways does more precisely describe practice used by you (by your family)?

% of polled parents of children elder than 4 years

% of polled children and teenagers

ILYA, 14 years

Yes, we make records of all income and expenses

8

23

Yes, we make records, but not all expenses and income are recorded

15

No, we do not keep records, but in general we know the amount of the income

55

No, we do not keep records and we do not know the amount of the income Don’t know/ have difficulty to answer

}

Yes, we make records of all income and expenses

16 6

20 8

Yes, we make records, but not all expenses and income are recorded

14 15

No, we do not keep records, but in general we know the amount of the No, we do not keep records and we do not know the amount of the income Don’t know/ have difficulty to answer children

38

55

11 16 6

17

parents

7

Do you involve your children in recording of expenses and income/ planning of family budget?

Received data confirm the results of qualitative research among representatives of target audience: as a rule, children, which participated in the poll, we not able to define exactly what exactly is family budget.

Only 16% parents actively involve their children in planning of family budget – they ask their opinion, advise with them. Another 11% keep their children informed of expenses and income, but the child cannot influence on the decisions regarding expenses and savings. More often information about current status and plans for budgeting are brought to the children in North Caucasian, North-West and Far east federal districts. Other districts, including Central federal district, are considerably behind in this indicator. Moscow is an exception, here 32% of parents involve children in the process of budget planning, with this 20% are asking for their opinion and advise.

% of polled parents of children elder than 4 years, across Russia in general and with breakdown into federal districts

73% No, we do not involve

28% 16%

11%

Yes, we involve and ask for his opinion and advise

Yes, we share, keep informed, but we do not ask for child’s opinion

}

42%

Share of parents, involving children in budget planning

40%

24% 21%

32% 19%

23% 42%

Do you parents or relatives involve you in records of family expenses and income/ planning of family budget? % of polled parents of children elder than 4 years

Yes, they involve, ask for my opinion, advise Yes, they share, keep me informed, but they do not ask for my opinion No, they do not involve children

parents

12

Do you discuss with your child/children issues related to money, finances and economics/ Do your parents discuss with you issues related to money, finances and economics % of polled children and teenagers

29

Yes, regularly 16

19

33

32 Yes, sometimes 39

72

No children

29 22

59

38

parents

8