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On financial education

By Francesca Malpeli



Is it all right for students to know more about how the Romans made business, than about basic economic concepts?


In my first macroeconomics class, the professor said that one of the main takeaways from his

lectures would be the ability to understand what journalists and politicians say when talking about the economy and to see through all the b**** they often display to persuade the public. On the way home I remember thinking about all the people that, not seeking a degree in economics, would never be exposed to what the professor then proceeded to teach us, and would probably spend their lives believing the words of whatever “economics expert” shouts the loudest without ever really understanding even the matter of discussion. How is this possible? Unfortunately, in schools, students are taught more about how the Greeks and the Romans made business 2000 years ago, than about basic economic concepts and financial notions relevant to anyone's day-to-day life.


This lack of emphasis on financial education in schools is of great concern, especially given the profound impact that these decisions can have on someone's life. It is vital for individuals to be educated in this matter in order to make informed financial decisions, manage their finances effectively, and understand the economic dynamics that are at the root of many current problems. As Arne Duncan, former US Secretary of Education, said, "Financial literacy is an essential skill for

success in the 21st century. The earlier young people start learning about financial management, the better prepared they will be to make informed decisions about their finances and build a secure financial future."Also according to a survey conducted by the Organisation for Economic Co-operation and Development (OECD), financial literacy is essential for individuals to well manage their money and avoid financial difficulties. Furthermore, individuals with higher levels of financial literacy tend to have higher levels of financial well-being and are better prepared for retirement.


The study mentioned above also found that 1 in 6 students in OECD countries is unable to make even simple financial decisions. This lack of education can lead to poor financial management and difficulties. By learning about simple concepts such as budgeting and saving, people can develop the skills they need to manage their finances effectively and avoid unnecessary struggles.


Furthermore, as my professor suggested, teaching people about the basics of finance and economics can help them to grasp a broader understanding of the economic context in which they live. According to a survey conducted by the National Center for Education Statistics, only 40% of U.S. high school seniors have a basic understanding of economics. This deficiency can lead to a lack of understanding of the wider economic issues that affect their lives, such as inflation, unemployment, and economic growth. By learning about economics, students can develop the skills they need to understand the dynamics that move the economy and make informed decisions about their own economic futures. Studies have been conducted on the impact of financial and economic education on economic growth and stability and they have shown that these teachings play a crucial role in stimulating economic growth and reducing poverty. Specifically, a study conducted by the Federal

Reserve Bank of St. Louis in 2011 concluded that financial education is capable of promoting

financial stability, reducing wealth inequality, and boosting economic growth by encouraging more entrepreneurs to start businesses and increasing investments.


Despite its importance, financial and economic education is still much overlooked in schools. For example, a report by the National Endowment for Financial Education states that only 17 states in the United States require a personal finance course to graduate high school. The situation in Europe is not less concerning, with a general disregard for financial education as well as great disparities between countries: there is a significant gap in financial literacy levels between countries in Europe. In Denmark, the Netherlands, and Sweden, for example, more than 60% of adults have a good understanding of financial and economic concepts, whereas in countries such as Bulgaria and Romania, the percentage drops to less than 25%.


For sure policymakers and teachers still fail to understand the importance of financial education in schools, underestimating its impact on the future of the students. Therefore, they may not prioritize financial education in their curriculum. However, as financial education benefits become better understood, there is increasing pressure on schools to make it a priority. Another reason might be scarce resources and funding: many schools struggle to provide for additional specialised teachers, and others materials needed to expand the curriculum.


Despite these challenges, there are examples of countries that have made financial education a priority and succeeded in promoting it among their citizens. For example, in Singapore, financial and economic education is part of the national curriculum, and all students are required to receive financial and economic education from primary school through to secondary school. The initiative has been widely successful, with a study conducted by the National Institute of Education finding that 80% of students who received financial and economic education felt more confident managing their money and making informed economic decisions. Besides Singapore, there are many countries that are also taking steps to promote this crucially important form of education. For instance, in the

United Kingdom and Australia, the subject of financial education is now part of the national

curriculum, and kids are required to take courses as early as the age of five.


Even though steps in the right direction are being taken, the issue is still largely unresolved. In particular, financial illiteracy disproportionately affects impoverished developing nations, probably due to a lack of adequate education systems. Data indicate that as little as 54% of people residing in developing nations have the capability or knowledge to open a bank account and in some cases also lack access to banking institutions. Indonesia constitutes an alarming example: data from an OECD study indicate that most Indonesians with a low socioeconomic status only have enough financial savings to last seven days in the case of an emergency. Another example is Zambia, where approximately half of the population does not utilize any financial services.


Even though it is still widely overlooked, financial education is paramount, as the former president of the United States John Adams put it: “All the Perplexities, Confusions and Distresses in America arise not from defects in their Constitutions or Confederation, not from a want of Honour or Virtue, So much as from downright Ignorance of the Nature of Coin, Credit and Circulation.”


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