Happy Financial Education Day!

Today, like every October 5, the Financial Education Day is celebrated. A day that, after reading the article, will be high on your agenda next year.

Today, like every October 5, Financial Education Day is celebrated throughout Latin America. Although the existence of this day may be unknown, it should be added that this event has been held in all Spanish-speaking countries, every first Monday in October, since 2015. A day that, incidentally, has already been integrated into the official calendar, as we must highlight that, among those in charge of promoting said event, those who assume the task of preparing and celebrating said day, at least in Spain, are the National Securities Market Commission (CNMV), in collaboration with the Bank from Spain; all this, under the principles of the OECD.

On this day, as its name indicates, the mission of the organizers, as well as those who share this mission, is to promote financial education in society, as well as its implementation in classrooms, as established in the Financial Education Plan. promoted by such organisms. Well, on that day, as announced by the web portal created by them, it has the objective of raising awareness in society about the need to have a financial education that allows us to understand minimally the economy that surrounds us and that affects us, in the same way that we allow us to understand how money works, as well as the culture of saving.

However, although it seems obvious to us, the data does not show the same in this regard. In this sense, the studies reflect how financial education continues to be a pending matter for citizens, at least in Spain. According to the latest PISA report from the OECD, the level of Spanish students in money, economics and finance is thirteen points below the global average. Some data that should concern us, since they place the country below the rest of the member countries in an issue that should be a priority for the country.

However, the data are more concerning when we measure the incidence of such reports in the adult population. In this sense, as indicated by the monetary authority in this regard, financial knowledge continues to be the most resistant to citizens in the country. According to the latest studies carried out by the financial company Nationale-Nederlanden, 44% of Spaniards have real difficulties when it comes to understanding basic aspects of the economy that surrounds them. All this, despite the fact that, as the same study collects, there is a consensus in which 77% of the parents surveyed believe that financial education should be a compulsory subject in schools.

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And, we must know that financial education, as with values ​​in our childhood, is of great importance for our human and social development. Since we are born, we are fully related to resources, goods, services, money as a means of payment, as well as other matters related to this topic. Well, for the simple reason that we need resources to survive, we need financial education to manage those resources. A financial education that, at least once a year, has a day that highlights such relevance.

However, although the studies refer to Spain, the underlying idea remains unchanged for all Spanish-speaking countries: financial education is essential.

Why is financial education important?

Financial education is an essential tool for understanding the world around us.

Since we were little, money and finances have been a part of our life. In the same way that in our childhood we filled the piggy bank to buy a bicycle, we exchanged coins for bags of goodies and we exchanged stickers in the schoolyard. When we grow up and become adults, these transactions and negotiations, loans with third parties, as well as everything previously mentioned, continue to be present in our lives, only they take more complex forms that impede their relationship.

However, if there is something that, in the same way, is present throughout our lives, it is the lack of financial education throughout our educational process. And it is that, except in exceptions in which the student has acquired the knowledge on his own account or through a private training plan and outside the State, Spaniards do not have any specific subject in the educational center that, of the same As it happens with others that teach transversal skills such as a foreign language or the correct use of language, I teach them the correct use of resources, as well as the methods to make efficient and responsible use of them.

This situation is reflected on many occasions, when we turn on the television and see our politicians, or economists, talking about economic concepts. Some economic concepts that, as we will see below, do not have the sympathy of citizens, as they do not understand their meaning and, therefore, their importance. In this sense, we refer to concepts such as the risk premium, the CPI, the GDP, the inflation, the Euribor, the IBEX, the S&P 500, the interest rate, among many others.

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However, what is worrying about this does not lie in the ignorance of the concepts itself, but in the effects that the decisions adopted, under complete ignorance, can have on our economy. Well, by ignoring concepts such as inflation, in the same way, we do not know the influence that inflation exerts on our economy and on our economic decisions, so we cannot anticipate and make decisions; since, incidentally, we will be talking about decisions that lack objectivity, in the same way that they will not be adapted to the situation that occurs at all times. All this, because these decisions do not entail a detailed and objective analysis of the situation.

This lack of knowledge in economic matters is a big problem for citizens, since in a situation of a rise in interest rates, for example, the expense for that citizen to take out a mortgage, or a loan, is greater than if, knowing this concept, he had made the decision when the interest rate policy did not contemplate that increase. In the same way, ignoring the effect of inflation on our assets can lead us to situations in which, due to not protecting our capital, savings depreciate to the point of losing a large percentage of it.

This type of situation means that the citizen does not know when to make the decision and with it, is forced to assume higher costs and, therefore, a lower disposable income. Well, as we said, ignorance prevents the correct decisions from being made, which ends up seriously harming citizens and their well-being.

A costly problem for the citizen

As we can see, the data for Spain are bleak; that is why the importance of that day. According to the study that we have analyzed, only 5% of those surveyed to carry out the study admit that they possess all the knowledge in economic matters; the rest, therefore, do not have the same capacity, so they require external help to lean on.

And is that, not knowing what elements our own payroll is composed of, for example, does not allow the worker to know what he pays to the State in taxes, as well as what, later, he will receive in his retirement. Due to these types of situations, said individual cannot make a correct economic forecast and, with it, come problems. Problems such as, incidentally, the fact that only 12% of the Spanish population recognizes, for example, having full independence when making financial decisions. While, on the other hand, 32%, taking into account the low salaries in the country, have the obligation to allocate part of their income to hiring financial advisers to be guided by their recommendations.

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Another very clear example of the decline that does not have a good financial education is observed in the obligation that all citizens in the country have to make their income tax return, in order to pay their taxes. In this sense, according to the study, 60% of those surveyed admit to having real problems when making the income statement. Only 40% of them know how to make the declaration correctly and the rest need help from third parties to make it. According to the data that we know, 26% need a professional to perform it, with the consequent cost that, as in the previous example, this entails, 22% do it by sending the draft to the Treasury, while 12% The remainder is done with the help of a family member or friend.

Not to mention Latin America, in which around 50% of the population is unbanked and has high levels of labor informality.

This type of situation, unfortunately, leads the citizen to have to require that external help which, as we said, carries a cost. A cost that the citizen must assume, along with the rest of the costs that, in itself, he has to face, for the simple fact of not having that knowledge. However, we are talking about a cost that could be eliminated in the future society, simply by applying policies that promote financial education. Well, with financial education we will not only be able to be more independent and free, but our decisions will have a better performance, in the same way that we will be able to save the money that, year after year, we have to pay to an “educated financier” to solve said problematic.

For this and for many more reasons, Happy Financial Education Day!

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