One in three EU households are unable to meet unexpected shocks to their finances – I grew up on a farm in Ireland, one of eight siblings. It’s where I first learnt about money. We sold produce to our local community and, as children, we handled cash and gave back change. We had an awareness of the money coming in and how it was used for the bills that needed to be paid. It was basic financial education in a very practical sense.
Today, the world is different. Myriad complex investment products are now at our fingertips and on our smartphones. We have a younger generation dabbling in crypto, some of whom are taking big risks on a device that fits in their pockets.
It is because the world has changed that we need to talk about money and financial literacy. People should understand how the financial system works, how it affects them and how they can make the financial decisions that are right for them. We should empower people so they know how to navigate their finances. The earlier in life that we build up financial awareness, the better.
This is especially important in the wake of the Covid-19 pandemic, which has widened the gap between the financially resilient and the financially fragile.
One in three EU households are unable to meet unexpected financial shocks in regular times, let alone in a pandemic. Sudden drops in income and unexpected expenses have put extra strain on many, while others have been able to save, but do not know how to make the most out of their savings.
Of course financial literacy alone will not solve such problems — it must go hand in hand with a well-regulated financial system, fair advice and good consumer protection — but it is a key part of the puzzle.
Across the EU, there are already great initiatives to improve financial literacy and more than half of EU countries have some form of national strategy in place.
But the level of financial literacy across the bloc varies widely, and overall it remains much too low, especially among women, young people and older people. That’s why the European Commission has been working with the OECD’s International Network on Financial Education to step up financial literacy in the EU.
Last week we published a new financial competence framework for adults in the EU. This joint project details the skills and knowledge that we all need when it comes to finance, especially in light of changes driven by technology and sustainability.
Public and private organisations can build on the framework to launch new initiatives. Education authorities could use it to draw up school curriculums, for example, teachers to design educational courses and businesses to provide training for staff or customers.
In the EU, education is the responsibility of national governments and the commission needs their support to succeed. We envisage these governments will use the framework to build on their existing work or develop new policies and programmes.
The commission’s work with the OECD does not stop here. We will work together to make sure the framework is widely used and monitor its implementation. We are also beginning work on a financial competence framework designed specifically for children and young people, which we hope to publish next year.
But this is not just a European issue. By linking with the OECD, we have been able to learn from their work in Europe and further afield. We can learn from what others are doing.
Finance is changing, and it’s changing fast. I want to help make sure that people are empowered to know the impact of the decisions they’re taking in our evolving financial system.