The Challenge of Ensuring Inclusive and Quality Financial Education

Recently, coinciding with Financial Education Day on October 4th, I had the opportunity to share some reflections with individuals from various fields and backgrounds about the importance of financial literacy among our population. I was surprised that, in some cases, my interlocutors considered it a matter of little relevance or more of a particular interest to the banking sector rather than an urgent national need.

However, the reality is that, in recent years, financial supervisors in countries around us have been insisting on the need to decisively promote citizens’ financial culture as it is a fundamental discipline for individuals to manage their finances responsibly and informedly. Ultimately, promoting healthy financial practices means enabling individuals to face adverse economic situations. These practices include proper planning for retirement, maintaining low levels of debt, or adequately holding savings products. All of this ultimately leads to greater economic peace of mind for citizens, and at the same time, a greater stability of the financial system.

It is also a fact that the rapid digital transformation of our societies is facilitating like never before citizens’ access to financial markets. Today, it is virtually possible with a simple click to invest in any asset, anywhere in the world and in any currency. This particularly affects, though not exclusively, young people who, due to their familiarity with new technologies, are becoming digital investors especially active overnight (in Spain, for instance, the percentage of young people investing in cryptocurrencies has already reached 12%). Lacking the necessary financial knowledge, these budding financial enthusiasts often take on excessive risks or fall prey to financial fraud. Undoubtedly, in these cases, appropriate financial education is more than desirable as it serves as an effective antidote against omnipresent information overload, the proliferation of low-cost intermediaries or gurus, the false allure of cryptocurrencies, and the impulsiveness encouraged by digital operations.

In our country, the promotion of financial knowledge is particularly relevant because, according to the latest Financial Competencies Survey conducted by the Bank of Spain, the financial culture of Spaniards is deficient. This applies especially to young people and the elderly, although there is also a gender bias since women, in general, possess fewer financial skills than men.

Nationally speaking, our business reality cannot be overlooked when assessing the importance of financial education: 99.8% of our companies are SMEs, and of these, 94% are microenterprises with fewer than 10 employees. Undoubtedly, providing these entrepreneurs with financial tools and knowledge is as necessary as it is urgent, as it contributes to strengthening the health of our productive fabric and making it more resilient to economic adversities.

In this regard, it is not surprising that a situation as adverse as the pandemic has highlighted the importance of financial education considering the direct impact that COVID-19 has had on the finances of companies and families. In fact, according to Intrum’s European Consumer Payment Report, 4 out of 10 Spaniards have acknowledged the need to improve their financial capabilities after the pandemic.

From this perspective, the financial education initiatives undertaken by entities associated with CECA have gained special relevance during the pandemic, particularly the Funcas Educa Program. This program, framed within the ‘Finance for All’ initiative of the Bank of Spain and the CNMV, helps fund a significant part of the financial education activities developed by the entities adhered to CECA. Since its inception in 2018, it has mobilized an investment of €12.35 million.

In 2020, the Program faced a double challenge: to continue with educational projects despite mobility restrictions and to support the most affected groups by the crisis. In this difficult situation, digitalization played a key role in ensuring access to training. Thus, 86% of the budget was redirected to digital actions, enabling over 4,000 activities and reaching 99% of beneficiaries.

The pandemic has also forced the prioritization of themes to support the most affected groups by the crisis. In this way, initiatives aimed at entrepreneurs, businesses, professionals, freelancers, and microenterprises have grown in importance. They accounted for 30% of the investment, reached over 35% of beneficiaries, and led the ranking of activities. Likewise, actions aimed at saving, spending, and budgeting have gained especially significant importance due to the impact that the COVID-19 crisis has had on household economies.

Finally, regarding the target audience, over half of the investment has been allocated to specific groups, that is, those with special needs or at risk of social exclusion, totaling 12.8 million beneficiaries.

Without a doubt, initiatives such as the Funcas Educa Program and those developed by banks are significantly contributing to fostering the financial culture of our population. Not in vain, as recognized by the Bank of Spain and the CNMV in their Financial Education Plan 2018-2022, financial entities represent the type of entity that develops the largest number of financial education initiatives.

Nevertheless, despite the momentum given to this issue by the banking sector, raising the understanding of the financial reality in our country is possibly more necessary today than ever. The digitalization of finances, the low profitability of savings products conditioned by unusually low rates, the financial fragility of youth in the face of labor precariousness, global economic turmoil, and the fragmentation of our productive fabric are just some of the factors that necessitate a deep reflection on the need to combine efforts to outline a coordinated, ambitious, and effective roadmap.