Author’s text by the Governor of the CBCG, Mr Radoje Žugić for “Pobjeda”


The pandemic points to the importance and role of savings

The current year was marked by a coronavirus pandemic globally. In addition to human casualties and significant problems in health systems, the virus spread has caused many economic and sociological issues in almost all countries of the world. The lockdown and operating in limited circumstances have led to declining economic activity and rising unemployment rates. This has put enormous pressure on governments worldwide, simultaneously highlighting the importance of financial management during a crisis. It again confirmed that rational budgeting was crucial for surviving the financial crisis, at both public and corporate, and personal and family finances.

To be able to plan his budget rationally, a person has to be financially literate. It means to be aware of savings, investment, and how the economy and financial markets function. Researches have confirmed a strong correlation between the level of financial literacy and the individuals’ ability to make adequate financial decisions based on available information. Dealing with financial pressures as individuals depends on how well we understand the debt accumulation dynamics, risk diversification, and other financial concepts. The pandemic has highlighted the importance of cutting costs and saving for the future, though in a more complicated way. It has further increased citizens’ awareness of the importance of saving and establishing a safe money for rainy day. Savings and investment are two concepts to which financial education programmes pay great attention. In the long run, it is more important how much a person saves than how much it earns. Likewise, investing can ensure a financially secure future. Still, it should be done wisely, with proper research. Therefore, regular savings and wise investments are a way to stay out of financial influence during emergencies.

Although financial literacy is always essential, its importance is especially emphasised during economic turmoil and uncertainty periods, such as the one brought by the coronavirus. It is useful to know survival skills in normal circumstances. Still, they are much more valuable when we find ourselves in an emergency situation. The same is with financial knowledge - it means the most during the financial crisis. The one who owns it has a significantly higher chance of overcoming the crisis faster and easier. A financially educated individual makes responsible decisions, which primarily enables achieving its personal benefit. Consequently, it leads to the establishment of efficient, stable and healthy financial markets, and, ultimately, contributes to the overall system’s financial stability.

Due to its importance for the financial sector and society as a whole, and since financial literacy in Montenegro is not at a satisfactory level, the Central Bank of Montenegro has set financial education as one of its priorities. It has established cooperation with the Organisation for Economic Cooperation and Development (OECD), positioned as the most prominent advocate of financial literacy. At the CBCG initiative, to approach the issue of the Montenegrin population’s financial literacy systematically, the National Committee for the Development of Financial Education was established this February. Its mandate is to propose the national programme for financial education. After that, the programme implementation will begin, which is expected to contribute to raising the financial literacy level in Montenegro. It is planned to pay due attention to the financial education of the youngest. In this way, long-term financial literacy is developed among citizens, and their social and economic exclusion is prevented. This will undoubtedly have a positive impact on economic recovery in the years to come.

The situation caused by the coronavirus pandemic has changed the clients’ behaviour, in terms of their greater interest in new banking services enabled by modern technology development. In conditions of increased health risk, this provides them with greater security. Thus, the number of new mobile payment users in Montenegro and the number of internet payment users by respective 25% and 6% at the end of the third quarter compared to the end of the first quarter of 2020. In the same period, the number of payment transactions - mobile payments increased by 39%, while the number of payment transactions - internet payments increased by 17%. In this context, the crisis can be seen as an opportunity to learn and adapt to the latest technological trends.

The aforesaid brings a self-evident conclusion. We can neither predict crises nor influence global world trends. What we can do is improve our knowledge and adopt financial habits. This will help us face the global economy challenges, follow and adapt to modern trends, to survive in conditions of intense change and economic instability.