14 OCT, 2023
By Constanza Ramos
Today, Monday 2 October, is Financial Education Day, a day that aims to raise awareness among citizens of how important it is to acquire a level of financial literacy at different stages of life. Undoubtedly, this is an unfinished business for Spaniards. Only one in ten Spaniards (13%) has a high level of financial education, where the average is 18%, according to the Eurobarometer survey carried out by the European Commission last July. These figures place Spain at the fourth lowest rate in the European Union.
Meanwhile, 65% of Spanish citizens have an average level of financial literacy. This percentage is slightly higher than the European average, which stands at 64% and is in line with the majority of EU member states.
Under the slogan of this year's Financial Education Day, "Inclusive finance, finance for all", we asked Isabel Giménez, Director General of the Fundación de Estudios Bursátiles y Financieros, Beatriz Mª Domingo Ortuño, Inspector, expert in Financial Education, of the Bank of Spain; and Javier Niederleytner, professor of the Master in Stock Exchange and Financial Markets at the IEB; how the financial education of Spaniards has improved in the last decade.
According to the OECD, financial education is the process by which financial consumers/investors improve their knowledge of financial products, concepts, and risks, and through information, instruction, and/or objective advice, develop their skills and confidence to become more aware of financial risks and opportunities, to make informed decisions, to know where to turn for help, and to take other effective measures to improve their financial well-being. Financial education therefore goes beyond the mere provision of financial information and guidance and should be regulated, to protect financial clients (as consumers).
Financial education helps the well-being of individuals and at the macroeconomic level to improve the competitiveness of countries. Financial literacy and the quality and quantity of information available are key elements in making informed savings and investment decisions, as well as in the proper functioning of markets and the economy as a whole. The global economic crisis of 2008 highlighted how gaps in people's financial literacy could lead to uninformed financial decisions. The coexistence of information asymmetries in financial markets and low financial literacy in certain sectors of the population facilitated the distribution of complex financial products to a public that did not understand the characteristics and risks of the products they were buying.
Since 2008, efforts to strengthen investor protection mechanisms have been significant. At the European regulatory level, the initiatives included in the new version of the Markets in Financial Instruments Directive (MiFIDII) stand out, and at the national level, the National Financial Education Plan (PNEF), led by the CNMV and the Bank of Spain since 2008, whose free training resources are concentrated on the Finance for All website, and the annual celebration on the first Monday in October of Financial Education Day, this year dedicated to inclusive finance.
On Monday 2 October, the Fundación de Estudios Bursátiles y Financieros, a partner of the PNEF, organized a workshop for people with intellectual disabilities at the headquarters of Asprona Valencia with the support of Fundación Ibercaja and the ONCE Foundation platform.
The digital society has increased the range of free financial education tools available to investors, but citizens have problems concentrating and focusing on their needs and interests. Speed does not equal efficiency and the incidence of financial cybercrime has also increased.
It is worth remembering that higher returns are often associated with higher risk. Any contracting of financial products and services should be done after deep reflection and be a decision in which prudence and common sense prevail, avoiding complex contracting platforms and products.
Financial education: a challenge already underway
Finance is part of everyday life. We have all seen at home how the family budget is managed and we all know sayings about money, such as "saving is not just saving, but knowing how to spend". But it was only at the beginning of this century that real financial education was promoted, and until then it had been largely relegated to the curricula of certain university courses.
What was the reason for the recognition of the importance of financial education? Fundamentally, concern about the effect that lack of financial literacy may have had on the gestation of the 2007 financial crisis. This concern encouraged the supervisory bodies (Bank of Spain, CNMV, and DG Insurance and Pension Plans) to promote the Financial Education Plan (PEF), which is responsible in Spain for a national strategy in this area, in line with the best international standards. The PEF aims to ensure that citizens acquire a minimum level of financial knowledge to help them make informed (knowing) and reasoned (thinking) decisions.
This strategy has been consolidated over four-year plans that have shown that Spaniards need more financial literacy. To this end, for example, the PEF involves a network of partners, 55 institutions, and public and private associations, which deploy financial education actions and activities for all sectors of the population and throughout the country. Moreover, successive education laws have increased the presence of financial education in the school curriculum in ESO, Baccalaureate, and, recently, in primary education. The media are also becoming more sensitive to these issues and are increasingly disseminating practical content on basic finance. Financial Education Day, which we celebrate on 2 October, is the main showcase for these initiatives and efforts.
Is it enough? Clearly not. The elderly, the vulnerable, and other groups require specific attention and content, tailored to their special financial education needs. But this does not prevent us from noting the improvement in recent years, reinforced by a growing demand for information and training. In any case, the new wave of the Financial Literacy Survey, soon to be published, will be key to being able to analyze how we need to improve and where it is necessary to act.
In recent years, the need for more financial information has been growing, mainly due to the emergence, for example, of social networks, which have spread the need for more and more information on the economic/financial environment. This is why citizens are showing more and more interest in this area because they feel that it affects them more and more directly.
Business schools such as the IEB have contributed very positively to this quest for training, opening their teaching programs not only to those seeking professional development but also to vulnerable groups and new generations, precisely as promoters and members of the "Finance for all" program, promoted by the regulators in Spain.
It is also very important to point out that schools are now teaching economics in the baccalaureate, which was not the case 10 years ago. As a first-year university teacher, I am pleased to see that students are increasingly better prepared and show greater interest in this subject because they are particularly aware of the impact of economics not only as a future professional development but also of the importance it can have in their daily lives.
By Duncan Lamont
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