Financial Well-Being and Financial Literacy in Romania

Abstract

This study quantifies financial well-being and its determinants, including financial literacy, in Romania. It addresses the main factors driving the low levels of financial inclusion and the inter-dependence between financial system development and financial education. To uncover what determinates financial well-being in Romania, a survey based on a questionnaire was conducted among 1,391 respondents. The results revealed a pessimistic picture correlated to four main deficiencies: lack of financial resources (53% of respondents did not save or invest, identifying the lack of financial resources as the main cause), lack of financial skills and knowledge (92% of the Romanian population is financially illiterate), lack of trust in financial institutions (27% of respondents have a specific preference for saving in cash), reluctance to receive information (39% of respondents declared that they were not interested in receiving financial information). Overall, the results indicate that financial well-being is unequally distributed among individuals suggesting the existence of a poverty trap continuously driven by structural economic deficiencies: in the absence of efficient public policies, the uneducated and low-income individuals do not have access to information being unable to save/ invest and participate in the financial system. Based on data, the study proposes a series of institutional and policy recommendations aimed at improving financial education initiatives, including the design of a national strategy for financial education.

Keywords: financial literacy, financial well-being, financial inclusion, financial education, Romania

JEL Classification: D10, G20, G50, G53, I22, I31