Financial literacy and education are key elements of the path to economic growth and social inclusion in the European Union. At the same time, it is important to remember the 2030 Agenda for Sustainable Development, adopted on 25 September 2015 by Heads of State and Government at a special UN summit, which includes 17 Sustainable Development Goals (SDGs). The 2030 Agenda, a world-wide landmark achievement, highlights the importance of ensuring inclusive and equitable quality education and promotes lifelong learning opportunities for all, as it is recognized by its Goal 4.
Nowadays an increasingly important aspect of education concerns financial literacy and education. To begin with, it is necessary to make a distinction between the two concepts. According to the OECD, financial literacy is a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being; whereas financial education is the process by which investors improve their understanding of financial products and services and, through information and objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their well-being.
If we consider the European context, the EU contains in itself the world’s best performers (Nordic countries) as well as the countries that score below global average (Romania, Portugal) in financial literacy rankings. Also, for Italy the results are not encouraging; according to a G20 report on adult financial literacy with questions surveying knowledge, behaviour and attitudes in financial topics, Italy ranked only 19th. This evidence shows that there is still considerable scope for improvement, especially in Southern and Eastern European countries.
Financial literacy and education should therefore be an integral part of the policy agenda of the EU institutions and Member States, as they can help tackle some critical social problems. The first one is the pressure on the pension systems, caused by a rapidly ageing population, which requires empowering occupational and personal insurance systems. Another critical issue is mortgage-debt and its impact on the total debt of households. Finally, financial literacy is functional to inclusive growth.
As more and more EU citizens are asked to make their own decisions about such issues, financial literacy is vital for their life-time welfare. All these problems are especially sensitive in the case of young people and their future, both as investors – especially when they have to plan their savings for retirement – and as household owners.
Europe is facing a serious problem of an ageing population, especially in some countries such as Italy. This problem is also evident in the financial sector. Investors and their financial advisors are getting older year by year. According to the statistics of Assogestioni – the Italian association of asset managers – the average age of people investing into mutual funds is 60 (2018), with a general increase over the past; it was 52 years in 2002 and 58 in 2013. In 2018 the share of investors between 26 and 35 years has consequently decreased from 15% to 6%. Similarly, the average age of Italian financial advisors is 51 (2018), whereas only 11% of them are under 40.
This evidence clearly shows that it is necessary to promote financial education and advice among young people, both as potential investors and financial advisors. Financial education, being pivotal towards delivering fundamental social values, can be described as a process which enables citizens to enhance their knowledge of financial concepts and products, understand the risk-return trade-off and find the most suitable solutions to their needs and dreams. This process shall be considered a life-long activity which should begin at a young age.
The starting point is financial planning, based on a life-cycle perspective. Financial advice can be seen as a fully-fledged service which complements financial education, as it is aimed at providing citizens with personalized and integrated solutions (investment management, tax planning, retirement, family and health protection) according to a life-cycle perspective. However, financial education and advice can perform their social roles and achieve their inclusive goals only if we consider that, according to the above-mentioned statistics, it is crucial to get young people involved with tailored initiatives. For instance, policy incentives aimed at promoting job opportunities in the financial sector are vital for the future of the profession of financial advisors. At the same time, financial education needs to be promoted, starting from school age.
Italy provides some positive examples. Since 2009, ANASF and PROGeTICA have been organizing “Economic@mente® – Metti in conto il tuo futuro”, a financial education programme for high school students. Economic@mente® provides students with a set of skills, based on their personal experiences, in order to teach them how to manage their future savings throughout their life by means of simulations, practical classes and tests.
In light of this evidence, the framework is crystal clear. It’s time to act and everyone is called upon to contribute.
FECIF Vice-President & Foreign Affairs, ANASF