Analysis: an inability to process financial information leaves us open to poor money decisions, increased debt and onerous financial commitments
As with many western nations, Ireland faces an increasingly aging population. To combat future stress on Ireland's state pension, the Government established a pension auto enrolment scheme in 2024 to assist low-income workers plan for their retirement.
But this scheme masked a deeper problem with Ireland’s financial education. A recent Department of Finance report highlighted Ireland’s shortcomings in financial education, with approximately 43% of adults failing to meet the minimum OECD level of financial literacy. In response, plans are underway for Ireland’s first National Financial Literacy Strategy, with anticipated delivery by the end of 2024. No doubt, the calling of an election will have contributed to a delay in delivery of such a strategy.
The National Bureau of Economic Research defines financial literacy as "peoples’ ability to process economic information and make informed decisions about financial planning, wealth accumulation, pensions, and debt." These money decisions face us daily, and key concern is the looming pension timebomb as individuals forego saving for spending.
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From RTÉ Radio 1's News At One, economist Austin Hughes on the latest findings from the Credit Union Consumer Sentiment Index which finds consumers are worried about economic outlook and still dealing with cost-of-living- pressures
As the cost-of-living crisis deepens, consumers are experiencing heightened financial anxiety, prompting increased research into financial wellbeing and mindfulness. Despite this, Ireland lags behind other nations in prioritizing financial literacy. Like many societal challenges in Ireland, the responsibility has largely been left to the private sector. For example, Bank of Ireland’s Money Smarts programme for secondary schools aims to invest €4 million in financial education by the end of 2025.
However, this raises ethical concerns and questions about conflicts of interest as a financial company's involvement in financial literacy education could blur the lines between education and promotion. Similar arguments have been made of the involvement of alcohol companies in Drinkaware for example.
While financial literacy education is beneficial at any stage of life, financial habits often begin forming as early as seven years of age, so earlier interventions may be key. Historically, Ireland's financial literacy issues were less pronounced, as limited access to credit constrained consumer spending, but easy access to credit since the Celtic Tiger era has led to significant levels of short-term personal debt.
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From RTÉ Brainstorm, 3 misunderstandings about money that could cost you a lot in the long run
Today, the prevalence of cheap credit echoes the conditions preceding the 2008 global financial crisis, leaving consumers vulnerable. This time is much more subtle though, as individuals finance impulse spending on a hamster wheel of short-term debt, rather than maxing out credit cards and borrowing vast sums.
Retailers have capitalised on this landscape, leveraging hyper-consumerism amid a widespread lack of financial literacy. While subscription models and hire-purchase agreements are not new to Ireland — slot televisions from the 1960s are a notable example — the plethora of financing options has heightened consumer susceptibility to impulsive spending.
The rise of subscription models is a striking example of this trend. From food and pet supplies to underwear and toilet paper, nearly every product or service is now available via home-delivered subscriptions. Many Irish households maintain multiple streaming service subscriptions, reflecting a shift away from traditional television consumption. Even Revenue and An Post have adapted, offering options like monthly deductions at source for property tax and direct debits for TV licenses respectively.
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From RTÉ Radio 1's News at One, Wizz Air to offer 'all you can fly' subscription model
Such arrangements normalise the view of financial commitments in terms of small monthly costs, obscuring the true annual expense and discouraging careful budgeting. This effect is compounded by the convenience of digital payments, which can make consumers "tap happy" and less mindful of the pain of payment effect typically associated with cash transactions.
These monthly transactions often become background bills that occur automatically and are easily forgotten. Providers exploit behavioural biases to retain subscribers, employing strategies like the sunk cost effect, loss aversion, and default bias. These tactics are further reinforced by dark patterns, particularly in cancellation processes.
Consider a free trial for a streaming service, which converts to a paid subscription after seven days. A consumer might subscribe to watch a flagship show, only to forget to cancel. After being charged for a month, they may perceive the cost as a sunk investment and choose to continue. Cancelling the subscription often involves navigating multiple "are you sure?" screens or encountering features like "coming soon" content and self-curated watch lists, which subtly encourage users to stay.
From TEDx, designer Sally Woellner on how design seeks to control us with dark patterns
While direct debits and subscription services have become central to modern business models, more concerning trends are emerging, particularly for younger consumers. Chief among these is the rapid rise of buy-now-pay-later services. These services are marketed as a way to spread payments interest-free over several instalments, but 36% of consumers fail to recognise it as a form of loan agreement.
Even more alarmingly, providers like Klarna openly promote their ability to increase average order values by 45% and boost shopping frequency by 20%. Consumers who use these services tend to spend more and shop more frequently than non-users. In an exploitative sign of the cost-of-living crisis, consumers are reportedly financing necessities like groceries through these services.
However, interesting trends are emerging as a counterculture to hyper-consumerism which pervades social media. One such trend is the rise of deinfluencing. This is a stream of new phenomenon of financial mindfulness which questions "how much is enough?".
From TEDx, Kevin Cavenaugh on financial mindfulness and how much is enough
Before you sign-up for another trial or check out that basket, consider whether the items are a need or a want. Common advice is to apply a 72-hour rule of resisting before purchasing: if you don't still need it then, you never really needed it to begin with.Review all your subscriptions, direct debits and buy-now-pay-later payments and ask yourself if you really need or even use those services. Ask yourself 'what is enough for you?' Every time we forego a saving or investing opportunity in favour of an impulse spend, we steal multiples of this from our future selves.
The growing reliance on subscription models and other new-school financial payments underscores the urgent need for robust financial literacy education. Without it, consumers remain vulnerable to poor financial decisions, mounting debt and a diminished ability to navigate an increasingly complex economic landscape. Urgent publication and implementation of a national strategy on financial literacy will be key to mitigating our impulsive desire for convenience.
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
