Knowledge gaps on the subject of money – does a “financial driver’s license” help?

Status: 11.01.2022 11:20 a.m.

What is compound interest? How does inflation work? Younger people in particular often lack the knowledge of how business works. To change that, some countries are introducing a “financial driver’s license”.

By Notker Blechner, tagesschau.de

Most young people can use their smartphones and e-scooters without any problems. With money, on the other hand, less so: According to a survey commissioned by the Federal Association of German Banks, almost half (44 percent) of 14 to 24-year-olds have no use for the term inflation rate. Almost two thirds do not know exactly what the European Central Bank (ECB) is responsible for. And 31 percent of teenagers can’t explain what a stock is.

The educational gaps in other EU countries are similarly large. In Austria, for example, “35 percent of people have problems describing the effect of inflation correctly,” said former Finance Minister Gernot Blümel (ÖVP) recently. The result: many citizens are overwhelmed when it comes to financial issues. Especially young people: Every fourth customer of a debt counseling service in the Alpine republic is younger than 30 years and has debts of more than 30,000 euros.

Austria launches portal for financial knowledge

Austria wants to remedy the lack of financial knowledge in the future. The turquoise-green government has developed a national financial education strategy designed to strengthen citizens’ financial literacy. And should help them to stop falling into debt in a hurry. In the course of this year, a financial education portal is to be launched on the Internet, which will bundle information on the subject and publicize initiatives. If you want, you can also file a “financial driver’s license” on the portal. According to the Austrian Ministry of Finance, it could possibly serve as an additional qualification in application processes. Admittedly, the “financial driver’s license” is not required to open an account or to take out a loan.

Several debt counseling services are already offering “financial driving licenses” in several federal states of Austria, for example in Vienna, Upper Austria, Salzburg and in the Voralberg. Under the motto “Fit for money”, the Voralberger license teaches children and young people how to handle money responsibly.

Other EU countries are also rushing ahead

Other EU countries are also involved in the fight against “financial illiteracy”, above all Sweden and the Netherlands. Greece, Poland and Portugal are working with the Organization for Economic Cooperation and Development (OECD) on national financial education strategies. The OECD has launched a global agenda to promote financial literacy and has called on states to take appropriate action. Over 150 countries around the world have followed the OECD recommendation and presented strategies for financial literacy.

And Germany? So far, the Federal Republic has held back on this issue. The grand coalition under Angela Merkel (CDU) saw no great need here. And even the current traffic light government does not focus on finances in its coalition agreement in education policy.

Germany is lagging behind

“Germany’s pent-up demand in terms of economic and financial education is glaring,” criticized Verena von Hugo, co-chair of the German Economic Education Alliance tagesschau.de. “We are the only country in the OECD that still does not have a national strategy for financial education.” Individual federal states such as Baden-Württemberg, Lower Saxony, North Rhine-Westphalia and Schleswig-Holstein have already made noticeable progress. There, economic education is already compulsory in school lessons. “Overall, however, economic and financial education is still in short supply in Germany.” Germany must be careful not to miss the boat.

The call for better financial literacy is getting louder. “The educational gaps are alarming,” warns the chief seducer of the banking lobby, Andreas Krautscheid, referring to surveys that show that many young people do not know what inflation is or what the ECB is doing. “They clearly show that economic and financial topics must be given a higher priority in the curriculum,” he demands.

Grade “unsatisfactory” for the schools

Individual banks or fund companies regularly publish surveys on the financial knowledge of citizens. Forsa recently found on behalf of the fund company Union Investment that just under one in five of the 18 to 29 year olds is well or very well informed about money. 61 percent of them rate their knowledge as merely satisfactory to sufficient.

Her school is to blame for that. Two thirds of the respondents complained that they had not learned as much or as little as nothing in terms of economics in school. The young adults gave the schools a grade of 4.8 for imparting financial knowledge. “According to this assessment, schools would be at great risk of being transferred when it comes to financial education,” says Giovanni Gay, Managing Director of Union Investment.

Ethical issues are also important

Private initiatives have recognized the emergency and are helping the schools to raise awareness. The Alliance for Economic Education Germany is involved in this area. It advocates more economic and financial education in Germany’s schools. It is crucial that the understanding of economic interrelationships are in the foreground when it comes to business and financial skills, explains co-chair of Hugo. “Structural knowledge is also required – for example, about the functioning of the social market economy and the assessment of ethical issues through to sustainable development.” A “financial driver’s license” alone could not do that.

“Finance driving licenses” are a rarity in Germany anyway. The Hamburg Red Cross is one of the few organizations where citizens can obtain such a license. The offer is only available for disadvantaged young people – as part of a debt prevention workshop.

“Stock exchange driving license” for students

The “stock exchange driving license” is more widespread in this country – based on the idea of ​​the late stock exchange expert and bestselling author Beate Sander. Student initiatives have developed such a driver’s license. For example, students from the University of Mainz recently started a pilot project Börsenführerschein @ school in cooperation with the Limburg business school Peter Paul Cahensy.

After all, the various initiatives now seem to be bearing fruit. In the corona pandemic, many young people discovered the stock market – and invested heavily in stocks via online banks or mobile phone apps from neobrokers. The next stock market crash will tell whether this trend will last.

Reference-www.tagesschau.de

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