The OECD established this Gateway to fulfill needs and gaps identified by key international stakeholders in the financial education area. It provides:
- Sound and comprehensive data, research, studies and information on financial education issues and programmes worldwide
- A reliable source of dissemination and comparison of this information
- A tool to exchange information, experiences and best practices on financial education between governmental representatives and key stakeholders
Major financial education stakeholders are invited to provide further information on their programmes/initiatives or on research work relative to financial education.
The Gateway also facilitates international co-operation on financial education as outlined in the OECD 2005 Recommendation on Principles and Good Practices for Financial Education and Awareness. A password-protected collaborative working space has been created to promote and support the exchange of views through the International Network on Financial Education.
Why financial education?
The importance of financial education
The importance of financial education has increased worldwide for several reasons:
Increasing transfer of risks to households which are more directly responsible for critical financial decisions for their future wellbeing.
- Decline of public welfare policies and social corporate programmes
- Growing range of risks affecting households at macro and micro levels
- Increased life expectancy
- Shift from Defined Benefit to Defined Contributions Pensions schemes
- Enhanced individual responsibility in financial and insurance risk management
- More households investing more income in financial assets
Development and sophistication of financial markets
- More complex products
- Increased supply of financial products
- Overload of financial disclosure
- Recent financial crisis in some countries
The worryingly low level of financial education
A number of surveys have been conducted in OECD and emerging economies [link to the section on assessing the needs] based on various criteria. All indicate a low level of financial awareness, literacy, capability and responsibility of consumers with the more vulnerable groups more affected and in particular:
Low level of financial understanding
Underestimation of needs
Lack of self-awareness of low financial education
Vulnerable and disadvantaged groups
Little shopping around
Resilient passive behaviours
The negative adverse effects of consumers' low level of financial literacy
It has been demonstrated that low level of financial literacy is one of the factors that can result in various non desirable effects for households including:
Massive rise in consumers' indebtedness in many countries (recent suprime crisis)
Low level of savings for retirement
Mis-selling for particular complex products
Undercoverage of risks with severe consequences
Higher costs for disadvantaged groups
Lack of trust in financial institutions
The benefits of financial education
Being a public good, financial education can generate a "win-win" situation for all interested parties:
Benefits to individuals: greater confidence in making financial decisions and improved financial situation (i.e. financial inclusion and improved financial access, adequate retirement income and reduced risk of over-indebtedness). Also benefits the development and growth of small and medium enterprises.
Benefits to financial industry and financial markets: higher level of financial literacy increases the demand for financial products and reduces information asymmetries. It also promotes market transparency, competitiveness and efficiency.
Benefits to regulators: financially literate consumers might help to ease supervisory activity and allow for lower levels of regulatory intervention.
Benefits to governments: better financial education might result in more successful pension and health care reforms, including through greater private saving rates, help reduce the risk of future public expenditure pressures, and in general contribute to economic stability and development.