Financial Literacy in Retirement Planning Context: The Case of Czech OlderWorkers
Recent political and financial reforms have increased pressures on individuals in terms of responsibility for financial security in retirement. However, certain preconditions must be fulfilled if an individual is to make such decisions—we group these unde
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Financial Literacy in Retirement Planning Context: The Case of Czech Older Workers Lucie Vidovi´cová
Introduction This chapter aims to introduce the concept of financial literacy and its specific explanatory potential in retirement planning within the cultural and social context of the Czech Republic. We could translate or substitute the general term literacy with skill or ability and hence understand financial literacy in a simplified way as a functional skill in the financial area. If we look at the definition of financial education as understood by OECD (2005), we can define financial literacy as an understanding of financial products and concepts with the help of information and advice, as an ability to identify and understand financial risks and make informed decisions. Our research targets the financial literacy of elderly people and that a decade prior to reaching standard retirement age (understood as the average retirement age). We presume that this is a period of increased interest in planning for old age as well as of more intense financial activity and investment. These age groups belong among the so-called baby boomers generation and they practice new sociocultural and consumer patterns that will most likely reform/reformulate the experience of old age in quantitative as well as qualitative terms (Gilleard and Higgs 2000). Literacy is generally understood as a condition of success (or the minimalization of failure), as a prevention of permanent marginalization, as a basis of full social participation, and consequently as a precondition of an individual’s and a society’s prosperity (Rabušicová 2002). Financial literacy —i.e., the ability to count, to navigate in financial systems, and react adequately to risks—gains importance not only at times of economic instability but also in later stages of life. Similar to the more general functional literacy, financial literacy also has three basic characteristics: relativity, variability, and continuity. The term relativity here refers to the “current state and the expected development of a given society. The more complicated the context and the more developed the technologies, the stronger the demands on the L. Vidovi´cová () Research Institute for Labour and Social Affairs, Jostova 10 (Room 3.18), 60200 Brno, Czech Republic e-mail: [email protected]
C. Phellas (ed.), Aging in European Societies, International Perspectives on Aging 6, DOI 10.1007/978-1-4419-8345-9_13, © Springer Science+Business Media New York 2013
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inhabitants’ literacy” (Rabušicová 2002, p. 42). In our context, this means that the more complicated and more complex, for example, the rules for the calculation of pensions and the relevant legislation, and the less clear the economic situation, the higher the demands on financial literacy. Variability has two components: individual as we can expand and develop literacy skills in the course of our lives but we can also limit or lose these depending on the extent to which we use a given skill. The other component
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