Citizens must be able to participate in economic and social decisions that affect their well-being, fostering responsible conduct in the society in which they live. However, many will be excluded from what should be an inalienable right if they do not acquire adequate training in economic and financial matters.
For citizens to control the process of making informed and rational decisions, it is essential that they understand the economic and financial issues that affect them. Unfortunately, Spain has one of the lowest levels of financial education in Europe, which means its citizens are more exposed to making inappropriate financial decisions or neglecting their savings capacity than those in countries with greater training in this area.
To address this deficiency, almost all programs designed so far in Spain promote financial education through an approach, very different from that proposed by other countries in our environment, based on two levers: the teaching of basic concepts and awareness campaigns.
The first involves teaching a minimum of financial concepts (inflation, interest rates, and diversification, essentially), presented as an optional subject, rarely integrated into compulsory education. The second refers to dissemination through awareness campaigns, such as the one we celebrate during Financial Education Week and the initiative led by the Bank of Spain and the National Securities Market Commission, known as ‘Finances for All’. However, there is a vast difference between transmitting knowledge and ensuring it is internalized and can be applied by citizens at the appropriate time.
Hence, many institutions are beginning to speak of financial health to refer to the development of attitudes beyond the mere knowledge of concepts, such as the habit of saving. This approach would not only benefit young people who, for example, wish to buy a home, but also other heterogeneous and diverse groups seeking greater economic freedom or wishing to avoid the inappropriate financial strain resulting from poor consumption or investment decisions. If the concept of financial health incorporates the development of certain non-cognitive skills and a greater predisposition to minimize the irrational biases of our behavior, it seems logical to suggest an economic and financial education program based on three pillars. The first is regulated and continuous training that imparts basic financial knowledge, ideally from the earliest years of compulsory education, in a cross-cutting manner, with relevant and captivating content, without duplication, combining theory and practice. This requires both clear incentives for teacher training and strong technological support for modern, flexible education adapted to each stakeholder group.
Secondly, it is necessary to stimulate the development of non-cognitive skills, independent of intellectual capacity, to strengthen impulse control, reasoning, critical thinking, and planning from a very young age. All these skills are essential for making optimal economic and financial decisions for individual and social well-being.
Finally, it would be advisable to enrich these experiences with behavioral economics, in line with the results of multiple studies that support the idea that decision-making depends more on emotions than on knowledge. The greater the financial education knowledge, the better that information will be processed. But in most situations, the context—almost always surrounded by uncertainty and subject to questionable quality and symmetry of information—combined with the difficulty of anticipating the outcome of decisions, leads to the emergence of cognitive biases that, if not corrected, will obscure the acquired knowledge base. In other words, knowledge of economics and finance and the importance of information in financial decisions tends to be diluted by certain psychological aspects of the individual, such as overconfidence, or people’s limited ability to process complex and abundant information. This leads to prejudices and emotions prevailing over rational choices.
This powerful trio would represent a qualitative leap in the ability to understand how economics and finance work. It would enable the development of a series of specific skills and knowledge that would facilitate making correct decisions based on an individual’s financial resources. It is not just about having a minimum of basic knowledge, but about laying the foundations for an attitude and behavior conducive to making responsible and rational economic decisions. This endeavor would allow a transition from financial education to financial competencies. This is the formula for improving our daily relationship with the economic realities that surround our lives.
Juan Carlos Delrieu, Director of Strategy and Sustainability at the Spanish Banking Association
