Financial Education? – No Such Thing
Almost half of all Europeans describe themselves as financially illiterate, according to the sobering result of an ING-DiBa study. The situation is especially dire in the UK and Germany, but there is a great need to catch up in other countries, too, such as France, Italy and Austria.1
The lack of financial education in many parts of Europe has been a broadly disputed subject for many years. The majority of society feels schools are responsible for this. Financial skills should be taught in a dedicated subject or at least increasingly incorporated into maths, politics or social sciences. Pupils see it the same way: "I am nearly 18 and have no idea about taxes, rent or insurance. But I can write an analysis of a poem. In 4 languages." A schoolgirl from Cologne received a wave of approval for this tweet three years ago.2 But not much has happened since. According to ING-DiBa, the proportion of young adults without financial education has actually grown slightly.
Complex Financial Sector - You Don't Stand a Chance with No Prior Knowledge
Sooner or later, everyone has to take responsibility for their finances. However, that is much easier said than done. Irrespective of whether it is "only" a mobile phone contract, your first tenancy agreement or concluding insurance policies: young people must learn to deal with risks, to make provision for health and old age and how not to fall into the debt trap. The market for financial products and services has a great deal to offer: thanks to technical and economic progress, offers have increasingly become better tailored to individual customer requirements. But this is a blessing and a curse at the same time. Too many options obviously make it very difficult to make the right financial decisions.3
Strong Demand, Too Little Implementation
In spite of some tests and pilot projects, the subject of Finance has not been able to establish itself in German schools. One of the reasons for this is bound to be the great need for coordination required by incorporation in the curriculum. Education authorities, politicians, teachers and other stakeholders have to come together to define educational standards, compile teaching material and develop a further training concept for the teaching staff.4 But things are progressing: since last year, "Economy/careers and study orientation" has been taught as a subject across the whole of Baden-Württemberg. And the introduction of the subject "Economy" has been decided in NRW. The content still has to be specified, however.5
Economic Upswing Thanks to Education
The effort is worth it according to financial experts. Because limited financial knowledge is often reflected in a greater tendency to caution. Many consumers prefer to opt for "simple", supposedly safer financial products, such as fixed-interest investments, building loan contracts and property. Although other investments can earn a higher return, most seem to shrink back from the large number of alternatives. Without advance knowledge, private investors often can't see the wood for the trees. US researchers assume that around 40 percent of the unequal wealth distribution in the USA is due to differences in financial education.6 So, it is high time to tackle the subject.