1. The level of financial literacy of Russians: before and during the crisis of 2008-2009 Olga Kuzina Higher School of Economics, Moscow ESA, Geneva, 10-09-2011

2. Goals of the research To define the concept of ‘financial literacy’ and to operationalise for measuring it in a survey To reveal the changes in the level of financial literacy of Russians during the period 2008- 2010

3. What is Financial Literacy? There is no agreement between the scholars about both conceptual and operational definitions of the ‘financial literacy’ concept to a broader definition which takes into account ‘behavior’, ‘attitudes’ and ‘skills’. From ‘knowledge’

4. Problematizing the concept of financial capability 1. Can we apply the concept of financial ‘capability’ in the institutional context of the middle income countries? At first sight it is obvious that this should be generally true for all countries. However, in volatile financial markets and under high inflation rate the lack of savings for retirement could be motivated by individuals' risk aversion rather than by the lack of financial sophistication. ‘ Financially literate’ people may prefer to rely on their social networks as effective decisions regarding the use and management of money rather than individual financial strategies. As a result – FL individuals may have paternalistic attitudes, lack of savings…

5. Problematizing the concept of financial literacy 2. Attitudes or preferences? The concept of rationality in Economics assumes that individuals attain their goals with the least possible costs, whatever these goals may be. If a person aims at going bankrupt and does it efficiently with overcrediting and risky investments his or her actions better not to consider as non-rational and illiterate. Signs of financial illiteracy or acting in accordance with preferences. A new enlightenment or a new religion?

6. Problematizing the concept of financial literacy 3. Financial literacy or financial education? It is not clear if there is a genuine influence of economic education on personal finances or people who choose Economics and Finance as their university degree are different from other professionals by their social and economic characteristics. People with major degrees in Economics and Finance show better results in management of personal finances. If economic education will be given to the general population it may not end up with the same results.

7. Financial Capability (FSA, UK) Managing money - which was primarily concerned with being able to live within one’s means. Planning ahead - which was required to cope with unexpected events and to make provision for the long term. Making choices - which involved being aware of the financial products that were on offer, and being able to choose those that were most appropriate to an individual’s circumstances. Getting help - which had two dimensions: self-reliance and using third parties.

8. Indicators of financial capability Managing money keeping records of income and expenditures reading the text of the contract before signing it Making choices comparing offers from different banks and costs of different products before making the decision knowing about the state deposit insurance Getting help being aware about the ways to protect consumer rights Managing money keeping records of income and expenditures reading the text of the contract before signing it Making choices comparing offers from different banks and costs of different products before making the decision knowing about the state deposit insurance Getting help being aware about the ways to protect consumer rights

9. The main hypothesis To compare the subjective and the objective indicators of FL H1. Both indicators went up – the crisis was a good teacher. H2. The subjective grades went up and the objective ones did not - FL did not increase while the overconfidence did. To compare the subjective and the objective indicators of FL H1. Both indicators went up – the crisis was a good teacher. H2. The subjective grades went up and the objective ones did not - FL did not increase while the overconfidence did.

10. Data All-Russian surveys 18+ June 2008 – the World Bank and NAFS November 2009 - HSE December 2009 - NAFS February 2010 - NAFS August 2010 - NAFS 1600 respondents were interviewed in each wave representative for whole Russia, cross-sections, similar sampling procedures, sample error - 3,4%

11. How would you estimate the level of your financial literacy? Source: NAFI, HSE %, N=1600

12. Is your family used to keep records of income and expenditures? Look at the card and say which option is the most accurate description of your (your family’s) practice? Source: NAFI, HSE %, N=1600

13. How often do you compare the terms and conditions for provision of financial services by various companies before you buy such a service? % of those who bought financial products in the past Source: NAFI

14. If a conflict with a financial organization (bank, insurance company or the like) arises regarding the provision of financial services to you, how confident are you in the quick and just resolution of the dispute? Source: NAFI, HSE %, N=1600

15. Which kind of losses are covered by the State insurance system? Source: NAFI, HSE %, N=1600

16. Do you know that in Russia there is the State insurance system of bank deposits? Source: NAFI, HSE %, N=1600

17. Which offer does seem to be suspicious to make you think of a danger of fraud? Source: NAFI, HSE %, N=1600

18. What do Russians want to know about personal finance? NAFI and World Bank, June 2008, first top options, multiple choice question

19. What kind of trainers do you see as the most suitable to deliver financial literacy educational programs? June 2008, first top options, multiple choice question %, N=1600 Source: NAFI

20. Doomed to succeed ? 20 Be cautious when the program is launched in the name of the state and better not aim it at increasing the use of financial services The state should focus on the consumer rights protection and the advancement of financial markets – transparent and just rules of play. Better not to impose the patterned models of ‘proper’ behaviour through social marketing Do not make people feel overconfident about the level of their financial literacy Be cautious when the program is launched in the name of the state and better not aim it at increasing the use of financial services The state should focus on the consumer rights protection and the advancement of financial markets – transparent and just rules of play. Better not to impose the patterned models of ‘proper’ behaviour through social marketing Do not make people feel overconfident about the level of their financial literacy

21. 21 Thank you for your attention The paper The Level of Financial Literacy of Russians: Before and During the Crisis of 2008-2009 was published in Economic sociology- the European electronic newsletter Volume 12, Number 2 | March 2011, pp.27-43 Thank you for your attention The paper The Level of Financial Literacy of Russians: Before and During the Crisis of 2008-2009 was published in Economic sociology- the European electronic newsletter Volume 12, Number 2 | March 2011, pp.27-43