Improving financial literacy must be a priority for Europe
This article is the last part of the FT’s Financial Education and Inclusion Campaign
The author is European Commissioner for Financial Services, Financial Stability and Capital Markets Union
I grew up on a farm in Ireland, one of eight siblings. This is where I first learned about money. We sold products to our local community and as children we handled money and gave change. We were aware of the money coming in and how it was being used for bills to be paid. It was basic financial education in a very practical sense.
Today the world is different. A myriad of complex investment products are now at our fingertips and on our smartphones. We have a younger generation interested in crypto, some of whom are taking big risks on a device that fits in their pockets.
It is because the world has changed that we need to talk about money and financial literacy. People need to understand how the financial system works, how it affects them, and how they can make the financial decisions that are right for them. We should empower people so they know how to manage their finances. The earlier in life we develop financial awareness, the better.
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This is particularly important in the wake of the Covid-19 pandemic, which has widened the gap between financially resilient and financially fragile people.
One in three EU households is unable to cope with unexpected financial shocks in normal times, let alone in a pandemic. Sudden drops in income and unexpected expenses have put added pressure on many, while others have been able to save but are unsure how to make the most of their savings.
Of course, financial literacy alone will not solve these problems – it must go hand in hand with a well-regulated financial system, fair advice and good consumer protection – but it is a key piece of the puzzle.
Across the EU, there are already significant initiatives to improve financial literacy and more than half of EU countries have some form of national strategy in place.
But the level of financial literacy across the bloc varies widely, and overall it remains far too low, especially among women, young people and the elderly. This is why the European Commission is working with the OECD’s international network on financial education to strengthen financial literacy in the EU.
Last week we published a new framework of financial skills for adults in the EU. This joint project details the skills and knowledge we all need in finance, especially in light of the changes brought about by technology and sustainability.
Public and private organizations can use the framework to launch new initiatives. Educational authorities could use it to develop school curricula, for example, teachers to design educational courses and businesses to provide training for staff or customers.
In the EU, education is the responsibility of national governments and the commission needs their support to succeed. We anticipate that these governments will use the framework to build on their existing work or develop new policies and programs.
The commission’s work with the OECD does not stop there. We will work together to ensure the framework is widely used and monitor its implementation. We are also starting work on a financial competency framework designed specifically for children and young people, which we hope to release next year.
But this is not just a European problem. By establishing links with the OECD, we have been able to learn from their work in Europe and beyond. We can learn from what others are doing.
Finance is changing, and it is changing fast. I want to help ensure that people are empowered to know the impact of the decisions they make in our evolving financial system.