Speech by Bank of Greece Governor Yannis Stournaras entitled “The need to promote financial education” at the “Financial Literacy: Challenge for the Future” webinar
17/03/2022 - Speeches
The webinar was co-organised by the Central Bank of Cyprus and the Bank of Greece.
Ladies and gentlemen,
I am delighted to be here with you today, among distinguished speakers, as I have the opportunity to express my thoughts on an issue of utmost importance, that of financial education.
Improving people’s financial knowledge has become a long-term policy priority for many countries, with central banks and supervisors playing an important role in this direction.
So, it is with great pleasure that the Bank of Greece organises this seminar together with the Central Bank of Cyprus, which I would like to congratulate on the key coordinating role it has assumed in the development of a national strategy for supporting financial literacy and fostering financial education in Cyprus. Designing and implementing a national strategy for financial literacy is one of the most effective ways to enhance citizens’ financial knowledge. In this vein, several central banks have assumed an important role, e.g. in Austria, Spain, Portugal and Finland, suggesting interventions and monitoring the strategy implementation. The development of such a national strategy in Greece is an ongoing project, coordinated by the Special Secretariat for Private Debt Management, under the supervision of the Ministry of Finance.
At this point, I would like to point out that the Bank of Greece has expressed its commitment to continue to actively support initiatives for the development of a national strategy, a project already well underway. Besides, the Bank of Greece is actively involved in promoting financial literacy through a number of actions, such as organising financial lectures, developing museum educational programmes and hosting exhibitions in its Museum, publishing books, as well as supporting similar actions of other institutions.
In particular, the Bank of Greece organises educational lectures for students of Greek and foreign universities, focusing on issues pertaining to the Greek economy and the euro area in general. At the same time, as a member of the Eurosystem, the Bank works closely with the European Central Bank and the other national central banks for the organisation of educational programmes and participates in the relevant working groups.
As part of its educational role and given that the vast majority of its visitors are upper secondary school and university students, the Museum of the Bank of Greece offers guided tours tailored to the needs of these age groups and hosts educational events focused on specific economic topics. The permanent exhibition of the Bank’s Museum aims to inform the public about the economic and monetary history of modern Greece and to familiarise it with basic economic concepts. Between June 2019 and October 2021, the Museum hosted the temporary exhibition “e-Payments: a roadmap”, which was accompanied by the museum educational programme “Without cash, how?”, approved by the Institute of Educational Policy of the Ministry of Education, with the objective to foster financial education for senior students of lower secondary school, as well as upper secondary school students. In December 2021, the Museum inaugurated the exhibition “Economy and Climate: Handle with care” that describes the phenomenon of climate change and analyses its economic impacts, its relevance for central banks, as well as possible responses to the ensuing challenges.
On the occasion of the new temporary exhibition, a graphic novel was published in printed and electronic form, entitled “The great transformation: Climate – Can we beat the heat?”, which is addressed to upper secondary school students and is a Greek translation of the original German edition. With a view to promoting students’ financial education, the Centre for Culture, Research and Documentation of the Bank of Greece has completed the publication of an illustrated dictionary, “The abecedary of economy”, featuring over 120 key entries from the disciples of economics and finance for children up to 12 years old, written by Nikolaos Philippas, Professor of Finance at the University of Piraeus.
The Bank of Greece cooperates with and supports institutions that are engaged in issues of financial literacy. It has hosted workshops of the Hellenic Institute of Financial Literacy and of Action Aid; moreover, every year it supports the student initiative “Get Involved”, a simulation conference of the ECB, whose goal is to foster financial literacy among young people. It supports the “E-square project”, a student initiative for the pilot implementation of the programme “Banking 101” in schools, as well as the “Greek Economics Olympiad”, which was organised by the “Center for Liberal Studies - Markos Dragoumis” (KEFiM) in collaboration with the Czech Institute of Economic Education (INEV).
As part of its social responsibility, the Bank of Greece will continue to assist efforts to promote learning and education, and will always support actions that enhance financial literacy, recognising its positive impact on the economy as a whole and on financial stability. Financial literacy is becoming increasingly important, as it is crucial for economic efficiency, the effective conduct of economic policy and thus financial well-being. First of all, even an elementary understanding of how the economic environment operates improves citizens’ ability to acquire the information they need and to make the best choices. Second, it contributes to building public support for “prudent policies”. A better understanding of financial matters leads to stronger civic engagement and broader public support of the necessary measures for the economy, thus addressing the plague of populism which is nowadays one of the major problems of democracy worldwide, while at the same time ensuring the sustainability of public finances and enhancing the effectiveness and flexibility of markets.
In its strategy review, the European Central Bank recognised explicitly that communication and the transmission of its messages are of critical importance. A credible, documented, timely and clear communication is a prerequisite for building trust. The wider public should not only be familiar with the messages of the central bank; it should also understand them. In order for central banks to be able to steer inflation expectations effectively, people should have basic economic knowledge. Enhancing financial literacy helps citizens accept more easily that safeguarding price stability is the appropriate objective of monetary policy and the way in which the independent central bank contributes to economic efficiency and financial well-being through the conduct of its monetary policy.
Next, I would like to elaborate on the importance of financial education for young people.
Today’s event has been organised in the context of Global Money Week, a global initiative aiming to raise young people’s awareness so that, from an early age, they are financially aware and are gradually acquiring the knowledge, skills, attitudes and behaviours necessary to make sound financial decisions and ultimately achieve financial well-being and financial resilience.
Young people are the most valuable asset of every country, for both its present and its future. Meanwhile, however, they are faced with huge challenges in a rapidly changing economic landscape, in which they become increasingly responsible for financially planning their own future. People in this age group have to make financial decisions early in their lives, with significant consequences for the coming decades and with an impact on their future well-being, wealth and income. In the modern digital era, in which technology is ubiquitous in our economy and society, the young generation, besides being familiar with the new digital technologies, must also be adequately trained in financial matters, so as to be able to fully understand and reap the benefits of financial technology. This is so because, despite the new opportunities offered by increased access to digital financial services and innovative financial products and applications, financial technology also entails risks, if it is not combined with the appropriate levels of financial education. In other words, the effective use of digital financial products and services requires increased levels of digital financial literacy in our times. At the same time, while making financial decisions, people should be able to take into consideration sustainability issues, e.g. climate change-related risks.
Overall, rapid developments in all sectors of economic activity, unanticipated risks, as well as the complexity of the financial system, make financial literacy a necessary skill for the 21st century.
So, what does a financially literate person know that a financially illiterate one doesn’t? We could say that the greatest difference is that financially literate people know how to make “smart” use of their money in their everyday lives, so as to attain long-term financial well-being. Besides, this is the theme of this year’s Global Money Weak: “Build your future. Βe smart about money”. The knowledge of what sound financial management means, as well as the skills for using this knowledge effectively in order to make the right financial decisions about the future, is what makes a financially literate person differ.
Indeed, the term “literacy”, although it initially referred to a basic level of education, concerns mainly the ability of people to utilise their acquired knowledge so that they are able to apply it practically in their everyday lives. It also includes the ability to view things with a critical eye and to effectively search for and synthesise information. In English, “literacy” is often translated as “education”. Besides, a literate person is often described as educated and, in this sense, literacy is distinguished from alphabetism. Learning, education, training, the educational system and school constitute interdependent concepts, processes, institutions and structures that form the most crucial element of progress in every society and economy. So, which one of these should play a dominant role today in developing policies to enhance financial literacy?
In my view, financial literacy programmes should seek to cultivate the economic thinking and training of young people. Economic knowledge plays a primary role in the organisation and functioning of modern society. The development of human capital with economic knowledge and skills should be one of the main tasks of the standard educational curriculum. However, several studies show that many people do not possess adequate economic knowledge, e.g. for calculating or understanding interest rates, or comprehending inflation and risk diversification. OECD survey results show that less than half of the adult population in G20 countries are financially literate, with the problem of financial illiteracy being much more marked in young people, as demonstrated by other relevant studies worldwide. According to the Standard & Poor’s Global Financial Literacy Survey, in 2014, on average in the European Union (EU), 52% of adults were financially literate, with the highest rates being recorded in Northern Europe and the lowest in the South. In Greece, the corresponding figure was 45%.
Therefore, actions are required to promote financial literacy in schools. For example, introducing a financial education course in secondary education curricula will contribute to the familiarisation of students with basic financial concepts that will help them make the right financial decisions later in their lives. In any case, financial education should provide, at a specific time frame and on the basis of a specific programme, the knowledge and skills that are needed later on both in the professional arena and, above all, in social life. Certainly, education should be an ongoing process with more general training courses and lifelong learning programmes.
Financial literacy is a perpetual, continuous process that spans over a person’s life. It is therefore necessary to develop one’s economic thinking in a broader sense. This is because economics affect all the aspects of our social life. For example, the value of saving is one of the most important lessons that a child could learn, as this will define his/her consumer behaviour. Saving money means spending less today in order to satisfy tomorrow’s needs. Saving is a crucial catalyst for the prosperity not only of individuals, but also of businesses, states and society as a whole.
However, in order for people to understand that “money doesn’t grow on trees”, and that every single euro matters, what is of key importance, apart from teaching basic economic concepts and tools, is to encourage positive attitudes through the development of micro habits already from an early age. According to the OECD, financial literacy refers not only to the knowledge, but also to the behaviours and attitudes necessary for a person to make sound financial decisions. The programmes that promote financial literacy should therefore aim at developing such behaviours. As Aristotle had said, we are what we repeatedly do. Indeed, there are several ways we can teach the youth concepts like desires, choices and saving for the future.
Let me conclude by saying that in the future economies are likely to face more crises than in the past. Hence, economies should become more resilient to adverse shocks, e.g. climate disruptions, refugee crises and geopolitical tensions, so as to avoid future debt crises and a further strain on next generations. Enhancing individuals’ financial literacy can play a key role in ensuring financial stability and mitigating the risks and impacts of future financial crises, by making households more resilient to shocks. It is widely accepted that the way in which individuals deal with additional financial pressure during a crisis depends on how well they understand financial concepts such as debt accumulation, risk diversification, etc. Therefore, financial education plays an important role in helping people cope with bad times and in developing the necessary skills to weather macroeconomic shocks.
I hope that all concerted efforts for raising the international community’s awareness of the importance of financial literacy work towards building a society where financial literacy will be a fact. In this way, our society will be shielded, and we will equip our children with the appropriate tools so that they can make rational financial choices in their lives and, most importantly, so that they can choose their studies and, subsequently, their professional careers, with a view to achieving long-term well-being.
Thank you very much for your attention.