Understanding finance will help you make the best decisions

According to a survey, 81% of Spaniards do not know how to answer three basic questions about inflation, compound interest, and investment risk. This is a consequence of the lack of financial education.

We can invest in cryptocurrencies, pay with Bizum, and use our mobile phones to check our savings, but if there is one subject we have been neglecting year after year, it is financial education—a matter that is less complex and more essential than most of the population assumes.

Financial education is the combination of awareness, knowledge, skills, attitudes, and financial behaviors necessary to make sound decisions in our daily lives and, ultimately, to achieve individual well-being. Neglecting this subject has serious consequences for everyone.

Deficiencies in financial education can lead us to make poor decisions about our personal finances, resulting in the risk of asset losses, indebtedness, and lack of savings, among other collateral damages, warn representatives from CECA, the association of savings banks and the banks created by them, which includes CaixaBank, Kutxabank, Cajasur Banco, Abanca, Unicaja Banco, Ibercaja Banco, Caixa Ontinyent, Colonya Pollença, and Cecabank.

As specialists indicate, our individual financial behavior influences the well-being of society as a whole by favoring the stability of the financial system. However, the outlook, at least in Spain, is not particularly encouraging.

Less knowledge than other EU countries

Diverse studies continue to focus on how little we know about finance. For example, more than a third of the Spanish population aged 18 to 64 admits to not knowing “what is necessary to make the most appropriate financial decisions”, as indicated by the Funcas 2023 survey on financial culture, conducted with a sample of 1,500 people representative of the internet-using population residing in Spain. Additionally, 36% of respondents who reported this lack of financial knowledge cited the perceived complexity of finances as the reason.

The Funcas data paints a similar picture to that provided by the 2021 Financial Competencies Survey from the Bank of Spain, published on November 14th. The most notable figure is that 81% of Spaniards do not know how to properly answer three basic questions about inflation, compound interest, and investment risk—or, in other words, only 19% answer all three questions correctly. The survey, slightly better than the one conducted in 2016, still places us with financial competencies far below those of other countries in our region. Spain is the fourth country in the EU with the worst training in economics and finance.

The major challenges of financial education: digitalization and youth

The lack of necessary financial knowledge multiplies risks in an increasingly digitalized society. Digital money, cryptocurrencies, and bitcoins are part of the current economy and dominate the messages transmitted through social media or by influencers with millions of followers. In Spain, more than half of those under 29 invest in cryptocurrencies, according to the IE Foundation and the Mutualidad de la Abogacía Foundation report, and it is possible that most do not understand the risks associated with such investments or use new digital investment platforms without sufficient financial knowledge.

Training citizens, especially the younger generations, in financial competencies is fundamental for individuals to learn how to manage their economy and resources in the best possible way, as well as to make informed decisions throughout their lives, as highlighted by the OECD. Thus, financial education is the best safeguard against fraud and poor investments, making it especially advisable to start promoting it at an early age, as emphasized by CECA.

The CECA entities allocated 2.23 million euros to improve financial education and digital skills within society in 2022

This association advocates for uniting efforts to immediately implement financial education into the school curriculum and to teach the basic financial skills and competencies, in addition to achieving a good educational ecosystem with financial education programs that involve everyone. Another challenge is to disseminate knowledge among the entire population, young and old alike, regarding new concepts and products arising from digitalization.

The largest investor in financial education

“In a world where technology and globalization deeply shape the youth experience, culture emerges as an essential tool to empower and protect young people from digital indoctrination,” states Alberto Aza, spokesperson for CECA. In 2022, CECA entities allocated 2.23 million euros to improve financial education and digital skills within society. With just over 15 million euros invested in the last five years, this sector is consolidating as the largest investor in financial education in Spain, initiating numerous initiatives on topics such as saving and budget management, cybersecurity, and investments, among others.

Furthermore, CECA is part of the Financial Education Plan, whose goal is to promote initiatives that bring financial culture closer to all groups, thereby reducing the digital gap. An investment aimed at improving financial competencies to provide a better quality of life for everyone.