Speech by Minister Kaag during the platform meeting Money Wise | Talk

Tale | 22-06-2022

Speech by Minister Kaag (Finance) during the annual platform meeting of Money Wise in The Hague on 22 June 2022.

Your Majesty, honorable Members,

Everyone has different views on money. We saw it in the video. For some, the word ‘money’ immediately gives stress, others see a world full of possibilities, and still others have already used them three times before getting them.

We need to take these different perspectives into account. At least if we want specific target groups to make financially sound choices. Fortunately, financial product providers, service providers, interest groups, regulators and policy makers in the financial markets are increasingly aware of this.

Research shows that most people think they are acting and thinking rationally economically. That they think before they use. In practice, the average issuance pattern proves to be much more intuitive. That you buy something, which later turns out that you do not need it at all. I can confirm that. Then I come home with something and my husband says: you already have it, but in a different color.

The research is conducted by behavioral researchers. There are many such scientists in space. They, too, will recognize in themselves that they feel they are acting economically rationally.

Most people do not immediately think about the direct financial consequences of a purchase. Big or small.

This can eventually cause people to get into financial difficulties. Especially if they do not have a financial buffer. If the refrigerator is suddenly broken, a school trip must be paid for at the same time as the new washing machine, then it can go wrong.

I think it is important that we help consumers with a sound financial household. That is why I am happy with the Consumer Choice Action Plan. This is especially important now that many people are struggling to make ends meet due to inflation and rising energy prices.

The action plan contains thirteen new initiatives based on behavioral insights. So we know from scientific research that humans make decisions pretty much intuitively and quickly, rather than thoroughly and rationally. Especially when it comes to money matters. With Consumer Choice’s Action Plan, we build a bridge between science and practice.

Dutch households must be sufficiently financially robust. It also means that it is important that consumers have a buffer. Last year, twenty percent of the population had less than 1,000 euros in savings. I think many Dutch people do not recognize this as an immediate fact. Thirty-five percent of the population had less than $ 5,000 in savings.

These buffers are too small. It creates great financial turmoil. If you have some setbacks, you can not handle it.

How can we get people to put more money aside? A survey conducted by the Volksbank shows that people are postponing putting money aside in a savings account. They want to be flexible with their issues. Behavioral analysis shows that ‘automatic savings’ is a good alternative, especially for people who can not afford to do without it so easily. The money left over at the end of the month is automatically transferred to a savings account. This allows people to build a financial buffer while maintaining the feeling that they can remain flexible with their spending.

ING is also working on this topic. How to encourage people to save through behavioral insight-based communication in the digital election environment. The bank explains that they are trying to get people to save through messages in the app.

The Consumer Choice Action Plan focuses on five themes in the financial sector. This has happened since it was founded, now three years ago. Together with this year’s new initiatives, there are now 27 initiatives that fall under the Action Plan.

In almost all initiatives, it is important that consumers gain insight into their financial behavior.

I will focus on a number of initiatives:

The Ministry of Finance, together with the asset managers of DUFAS and the Dutch banking association, will investigate the effect of warnings for low-risk investment products. Do the warnings actually stop people from investing, or does it make people more aware of their choices? And I would also be interested to know if they make other choices.

Within the Dutch Association of Insurance Companies, some insurance companies have experimented with referring customers with money problems.

It goes beyond just saying that someone needs help. For only that announcement can in itself also have the opposite effect.

The Knowledge Center for Psychology and Economic Behavior, in collaboration with Money Wise, will use behavioral experiments to investigate how Geldfit’s website can better take psychology into account in asking for help while maintaining self-esteem. Because, of course, that’s what it’s all about.

With the results of that research, people in financial difficulties can be helped much better.

The same knowledge center, together with the bailiff’s court, will investigate how they can better help young people with debt. This research focuses mainly on encouraging young people to ask for help when they have rising debt. Early intervention on the prevention side.

Maybe it’s even better to have contact when people are in danger of getting into debt. That debt can be avoided. Behavior Studio, AEGON, FREO and Nationale Nederland are investigating this. It contributes behavioral researchers from AFM and a number of universities.

These are interesting studies that need to be done thoroughly. But I would prefer to know the results now. That way, we can try to prevent people from getting into debt.

The Consumer Choice Action Plan is about awareness. How can people handle money well? Or learn to do it right again.

The action plan also emphasizes sustainability. How can the financial sector use behavioral insights to help consumers make healthy sustainable economic choices?

According to studies by Behavior Change Group and Natuur & Milieu, among others, consumers take no chances when they make their homes more sustainable. It often takes a long time before they actually put in the effort. Economic return on investment seems to be very important when choosing sustainability.

We need to take the outcome of these types of studies into account in our policy.

All studies show that it is often very difficult for consumers to make economic choices. Once a choice is made, it can have a huge impact on life. This makes it so important to make the consequences of choices easier, more transparent and more insightful for consumers. We still have a long way to go here.

We can investigate anything, but of course it’s about how the results are used in practice. Part of this practice can be seen in the behavioral market, where behavioral insights are shared. I want to be there, I suggest you do the same today.

In a year’s time we will see the results of the thirteen new initiatives. I hope that many of the experiments, studies and initiatives of that time have also been translated into insights that will be embraced by the whole sector. Once we know what works to promote financially sound behavior, the financial sector can use this to gradually make the Dutch financially healthier: less stress and more prosperity and well-being. That’s part of it.

Thank you.

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