Austrians remain avid savers, but they often park their money in low-yield savings accounts where the real interest rate is often zero or negative, which means that they are effectively losing purchasing power. Even though there has been a slight increase in security investments such as stocks, bonds, and funds in recent years, these investments are still not Austrians’ first choice when it comes to building long-term wealth. A recent WU study sheds light on the reasons behind this cautious investment behavior.

Studies conducted by the OECD show that, compared to other countries, Austrians have very solid levels of general financial literacy, so there must be other factors at play. Maybe a lack of specific knowledge about securities, or maybe also certain beliefs and assumptions about investing? As part of a study designed to shed light on these questions, Professor Bettina Fuhrmann, head of WU’s Institute for Business Education, had the Gallup polling institute survey 1,000 Austrians aged 18 to 92 about their financial knowledge.

Solid general knowledge but gaps on specific investment types

The results show that a vast majority of adults in Austria understand the general basics of investing, such as the development of purchasing power under inflation and the principle of risk diversification. However, Austrians are less savvy when it comes to specific investment products such as stocks or bonds. For example, around 60% of the respondents assume that higher interest rates on some corporate bonds are due to higher profits generated by the respective companies. Around half of the respondents were unable to answer the question about the importance of the timing of a one-off investment versus repeated investments correctly. About one in three respondents believe that dividends are a form of secure income for shareholders, regardless of the respective company’s profits. In total, however, 36% of respondents got at least six of the seven investment knowledge questions right, even though only 24% claimed to have good knowledge of securities and 50% stated that they were not interested in securities at all.

Financial education is key for avoiding mistakes

The beliefs held by the respondents are indicative of further misconceptions: Around 44% of respondents agree with the statement that investing small amounts of money (e.g. €30 per month) in securities is not worth it – apparently, these respondents are not familiar with the concept of a savings plan. 60% believe that investing successfully requires years of market experience, and 41% think that the stock market is nothing more than a game of chance. These beliefs influence people’s interest in security investments, as well as their actual security investment behavior. These findings underscore the importance of targeted financial education as a way of providing people with fact-based knowledge about investment opportunities and enabling them to make informed decisions. In addition to net household income, gender also plays a role in this regard. Men make more investments than women, but, on average, they also have more money available to them.

On April 2, Campus WU hosted a panel discussion entitled “How Austrians Invest their Money” as part of the “WU matters. WU talks.” Series. Click here to watch the full talk (in German): Wie investiert Österreich? | WU matters. WU talks.

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