Examination of the attitudes and behaviours of families towards financial risk management

Many factors such as the changes in the professional areas, unemployment, increase in the use of consumer loans and credit cards, changes in the purchasing power of money, increasing tax burden, inflation, interest rates and complex consumer markets have expanded the scope of the concept of ?financial implementation in the family? (which was only limited to budgeting) in such way to cover resource management based on more comprehensive economic concepts. Families are offered quite complex options in banking services, loan resources, savings plans and investment opportunities. Therefore, it is now difficult for families to make decisions on financial implementations which have turned into a risky process for most of them. Due to these reasons, a study titled ?Examination of the Attitudes and Behaviors of Families towards Financial Risk Management? was planned and carried out with the participation of 440 voluntary families representing the families living in mid and high socio-economic parts of Ankara Province and selected via stratified random sampling method.On the basis of the questionnaire developed, data were collected via face-to-face interviews made on 8 September-25/2007 December period with the person responsible for the financial and risk management of the each family. SPSS 11.5 package program was used in the analysis of the data obtained. Chi-square, kruskall wallis and t-test were performed to analyze the significance of the data in terms of education and income-explanatory indicators.Total average mounthly income of families was recorded as 2399 YTL. Salary/monthly income (1917 YTL) constituted an important part of this amount. Insufficient level of income was listed as the most important difficulty families encountered in the utilization of income. It was followed by debt planning and determination of investment areas.An important part of the average monthly income of families was spent for food and accommodation. They were followed by education, clothing, transportation, cleaning, personal care, cultural-entrainment activities, health and consumer durables. While preferring credit cards in the purchase of food and clothing, families preferred cash payment in the expenditures related with the house and the household, health, cleaning, accommodation, transportation-communication, cultural-entertainment activities and personal care (p<0.05; p<0.01).Nearly half of the families borrowed money (p<0.05). Borrowing reasons were listed as making big investments such as purchase of a house, land or a car; which was followed by the reasons of using credit cards and the insufficiency of the income in meeting the needs (p<0.01). Families generally preferred borrowing particularly for the purchase of food and clothing and for the expenditures related with the house and the household (p<0.05; p<0.01). Families borrowed money mainly from banks-financial institutions, family members, friends, relatives and provident funds (p<0.01).More than half of the families stated that they could make some saving. Nearly half of the families could save 201-500 YTL, on average, in one month (p<0.05; p<0.01). Families made saving to guarantee the education and the future of their children and for any unexpected spending (p>0.05). The main information resource families benefited from in utilizing their savings was their own knowledge and experiences, which was followed by the opinions offered by the banks and financial experts and mass media (p<0.05). Families utilized their savings by investing in foreign currency, deposit-checking account and gold. The main problem was stated as the difficulty in understanding the interest accounts, the effects of misleading advertisements/commercials and misdirecting of the banks and financial circles.Half of the study families could make some investments (p<0.01). They made investments to reach prosperity, to feel themselves secure in financial terms and to generate more income (p<0.05). Families mostly preferred the investment tools they deemed secure in financial terms (p<0.05).Nearly all of the families experienced difficulties such as a malignant disease/accident, break-down of their vehicles-devices, ending of the aid received from family/friends and most of them were encountered with problems such as loss of job and decrease in the salary of one of those generating income for the family. They were exposed to income loss as a result of these unexpected incidents (p>0.05).Investment tools preferred by the families included term deposit, gold and foreign currency. The investment tools they wanted to own, on the other hand, included government bond, treasury bond, life insurance policy, B-type investment fund, term deposit, gold and foreign currency.Most of the study families deemed foreign currency, securities, A-type investment fund, repo and gold ?risky? while government bond, term deposit, treasury bond, personal retirement account, life insurance policy and B-type investment fund ?risk-free?.Most of the families believed that gold, term deposit, government bond, treasury bond, foreign currency, personal retirement account, B-type investment fund, life insurance policy, repo and A-type investment fund had the risk of losing all the money.More than half of the study families thought that foreign currency, securities, A-type investment fund, gold, repo, B-type investment fund, personal retirement account and life insurance policy had the risk of losing its value and that term deposit, treasury bond and government bond did not have such risk.Most of the study families were of the opinion that gold, term deposit, B-type investment fund, foreign currency, treasury bond, repo, government bond and A-type investment fund had the risk of inconvertibility into cash and that life insurance policy, personal retirement account and securities did not pose any such risk.Half of the families stated that risks posed by investment tools could not be controlled via diversification. However, families with higher education background and high socio-economic level suggested that risks imposed by investment tools could be taken under control through diversification (p<0.05).Most of the families were of the opinion that insurance policy could be obtained to prevent possible risks to occur (p<0.05; p<0.01). Most of the study participants, their spouses and their children were the members of Pensioners? Fund. Most of the families did not have private health, private life, natural disaster and fire, theft and motor insurance.Most of the families completely agreed with the following statements included in the Financial Management Attitudes Scale: ?Bills should be paid on time?, ?Bid debts should be paid back according to a plan?, ?Every month, credit cards should be paid timely?, ?Attention should be paid to ensure a reasonable proportionality between monthly income and debt amount? and ?Money is an important tool to meet demands and needs?.More than half of the study families agreed with the following statements listed in the first dimension (risk perception) of Risk Management Attitudes Questionnaire: ?Families should have emergency fund for the unexpected expenditures falling out of the insurance coverage?, ?Making investments is important for financial security?, ?Saving money is important for providing a better future for the children?, ?An investment should be converted into cash at any time without any value loss?, ?Saving money is important for the retirement? and ?Investment areas having the potential of increasing value should be preferred?.More than half of the families agreed with the following statements listed in the second dimension (control of the risk) of the Risk Management Attitudes Scale ?Families should purchase private life insurance policies?, ?Insurance coverage and costs should be compared so as to purchase only the necessary ones?, ?Families should purchase theft insurance?, ?Families should purchase natural disaster and fire insurances?, ?Families should purchase basic insurances covering health and accident insurances?, ?Families should purchase motor insurance?.A statistically mid-level, positive and significant relation was detected between the attitudes of the families towards financial and risk management (p<0.01). Families having positive attitudes towards financial management also had positive attitudes towards risk management.Key words: Budget, Borrowing, Savings, Investment, Risk, Financial Risks, Risk Management and Insurance.