Citizens lack knowledge of basic financial issues
Various studies show that the vast majority of citizens have close-to-zero knowledge of basic financial issues. According to a survey carried out by Citigroup, two out of three consumers in the UK feel that financial matters are too complicated for them to understand.
Another poll revealed similar results in Italy, France and Spain, while a Hungarian study showed that 70% of the interviewees were not aware of the meaning of inflation. More research funded by the European Commission underlined that, in Eastern Europe, almost half of the population does not have a bank account, which is the basic starting point of any financial operation (EURACTIV 29/05/08).
On the other hand, citizens are increasingly aware of the importance of having a financial background. Research carried out by Visa in the US revealed that the vast majority of parents interviewed were in favour of financial education at school for their children. They rank the development of good financial skills second only to personal safety.
Initiatives already launched at national level
European countries have already launched a range of projects to offer financial education to schoolchildren, workers and retired people. Several programmes are aimed at teachers to give them the necessary tools to teach new subjects. An extensive assessment of current initiatives, carried out on behalf of the European Commission, identified 180 financial literacy projects in the EU. Children and young adults are the main target groups for the majority of the initiatives. Many also focus on low-income and low-education groups.
In Austria, a project entitled "debt-free through life" involved around 4,000 young students between 2001 and 2007. Dedicated workshops targeted three groups of students. The youngest (between 11 and 13) were taught basic financial principles, such as where money comes from and the fact that financial resources are limited. The second group, aged between 14 and 15, learned of the concepts of saving, current accounts, cash and payment cards. The third group, featuring participants aged up to 18, focused on life-planning, indebtedness and credit.
In Sweden, a similar project addressed adult workers of close to retirement age, with the aim of giving them the essential information required to invest their retirement money. The initiative was carried out by a national bank, Swedbank, to narrow the information gap that emerged following the introduction of a new pension system for Swedish employees in 2000. The bank offered this service for free, getting an opportunity to train new potential customers in exchange.
The Commission backs initiatives such as these, which recognises that differentiating courses according to different ages and needs is vital.
EU initiatives underway
In 2007, the EU executive intensified its efforts to improve financial education in the member states. After the US credit crisis sent shockwaves through the world economy over the summer, Brussels issued a document in December focusing on financial education and outlining its future initiatives in the field. The principal aim is to promote national actions by identifying and sharing best practices.
As part of the initiative, a network of national experts in the sector was established in 2008 with the aim of spreading best practice across the continent and harmonising teaching methods and curricula as much as possible. The group, which plans to hold its first meeting in October 2008, is composed of representatives of national authorities, financial service providers and consumer organisations. Members of the group are expected to advise the Commission by analysing the European situation and evaluating the application of the measures put in place by Brussels until 2010.
The Commission also launched a website dedicated to consumer education, Dolceta, with two sections, one on consumer rights and a second on financial services. Everybody can freely access the website (available in all EU official languages) and test their knowledge of financial issues, such as mortgages, savings, investments and means of payment.
An updated version of the website is expected soon, to match the specific needs of young people. The new service will target students in primary and secondary schools with simpler language and explanations of basic financial issues, such as using a payment card or running a bank account (EURACTIV 17/04/08). The move is in line with the EU's policy of tailoring financial education to different age groups.
Young people are also the target of another Commission initiative, the Europa Diary. In 2008, almost three million students in EU secondary schools began receiving copies of the diary, which contains essential information on the European Union and its policies and basic tips on consumer rights, including financial issues. The 2008/2009 edition explains to students the concept of credit, its advantages and its risks. A tool kit for teachers was also provided to facilitate the task of tutors.
The private sector has also launched its own initiatives to stimulate financial education. Among the most recent moves, Visa Europe launched the "Better money skills" website which freely offers visitors a test of their financial skills.
Harmonising school curricula: the way forward?
But the boldest and probably most controversial proposal is to introduce new school curricula, where financial matters would be taught alongside more traditional subjects like history and geography.
From the Commission's point of view, such an initiative should be applied by all EU countries in a harmonised way. As the US credit crisis showed, the consequences of financial turmoil are felt well beyond national boundaries, the argument goes. Badly educated consumers in Poland might easily damage financial markets in Italy or Slovakia, it said. The same line of thought seems to be emerging in the European Parliament, according to an own-initiative report drafted by Socialist MEP Iliana Malinova Iotova (Bulgaria) and approved by the Assembly in November 2008.
To acheive this objective - the ultimate application of which would continue to rely on national education systems - the Commission has a series of weapons in its policy arsenal. A network of financial education practitioners will start work in October. The experts will be able to rely on a new tool: an online database of financial education schemes and research in the EU. The database will complement the findings of the extensive survey carried out on the EU executive's behalf between January and November 2007 on 180 schemes and initiatives applied throughout the bloc.
In addition, an upgrade of the Dolceta website will involve new educational tools for youth but also a training module for teachers. The objective is to provide teachers with a free, ready-to-use kit to teach their students the basics of finance. The move is supposed to encourage teachers to give lessons on a voluntary basis before official curricula are redefined.
The Commission is also engaged in awareness-raising campaigns about the importance of financial education. Brussels actively encourages national authorities to raise the issue by sponsoring a number of targeted events in member states.