Long-term savings and investments are becoming important due to globally increasing longevity and declining birth rate. However, people in general have low financial capability and understandings about the risks that they face. Moreover, financial products are becoming more complex. Therefore, there has been increasing demand for financial education. Let’s take a deeper look into what financial education experts have to say on the way to promote long-term savings and investment.
Among various government officials, experts and scholars who participated in “High-level Global Symposium on Financial Education”, held on February 27, Chairman Vasco Cavalcanti of Securities and Exchange Commission of Brazil said evidences show that social and psychological factors can dramatically affect people’s behavior. Therefore, he insisted that researchers, scientists and policy-makers should work together to design intervention measures, test approaches and connect evidences. He sited Brazil as an example. Brazil succeeded in making joint education programs with the help of the international organizations. “It worked so well that Brazilian committees started to make national strategies for financial education in schools. Insights, evidences, useful policies and recommendations from international organizations helped us to design a National Strategy for Financial Education.” Moreover, he highlighted that with the guidelines and resources of World Bank, Brazil was able to evaluate financial education projects, thanks to which Brazil could realize that financial education actually changed students’ attitude toward saving.
Adele Atkinson, Policy analysts of OECD insisted that “Financial education is really important and it does not stand alone.” OECD has been working on the financial education making a subgroup which focuses on financial literacy. “We have been working with small group representing each country and individuals who expertise in long-term saving and investment.” With the request of G20 Finance Ministers and Central Bank Governors, OECD and other international organizations developed principles on consumer protection. As a result, the OECD released the ‘G20 High-Level Principles on Financial Consumer Protection’. It is aimed at encouraging other countries to enhance financial consumer protection. Also, ‘High-level Principles on National Strategies for Financial Education’ was endorsed by the OECD and INFE. It provides policy framework for national strategies for financial education. They are designed to complement existing international financial guidelines. She stated “OECD provides policy guidelines collecting data from different countries and creating a master dataset.”
Professor Mikyong Yun urged that “financial education is important to Korea because of large increase in population that is making financial investment.” Korean investors are losing a lot of money because they do not have enough experience and fully understand the risk. She pointed out that this has been acting as a barrier to those who try to move on from low to middle class. Investors usually have short-term prospective on investments. They want quick and high return. But they forget this investment has high risk. In the case of Tongyang Group, 70% of the victims were women and 74.5% of them were 40s or above. Those who have less knowledge with capital market and financial products are much more prone to fall victim to this problem.
Financial regulators have been trying to expand the financial education programs starting from 2002. The main thing they have been doing is making textbooks for elementary and secondary students and training teachers, college students as well as financial educators. In 2013 the Financial Services Commission drew up a plan to facilitate financial education. Professor Yun said that considering that investors who have little knowledge of finance tend to fall victim easily, investor protection education which specially targeted to investors is needed on top of the FSC’s plan.
Lori J. Schock, Director Office of Investor Education and Advocacy, U.S Securities and Exchange Commission, noted that the SEC made an ‘Outstanding Investment Fraud’ program to warn about fraudulent investment schemes. This program contains moderated presentation, videos and learning activities and exercises. It is aimed at helping investors to understand fraud risk and recognize persuasion tactics. Moreover, the SEC is issuing investor alerts to remind investors about the risks and educating people through twitter(@SEC_Investor_Ed) and websites.
Eunjung Kim (firstname.lastname@example.org)