Financial Education in Europe OECD latest publication on financial education

Ms. Flore-Anne Messy Deputy Head of the OECD Financial Affairs Division, INFE Executive Secretary

20 April 2016

2 |

OUTLINE

Financial Education in Europe

Rationale Policy intervention Challenges and future directions

|

BACKGROUND AND SCOPE

The report :

• Has a wide geographical scope :UN definition and membership in the Council of Europe. It includes all European Union countries and 20 more.

• Covers financial education and relevant financial consumer protection and financial inclusion aspects

• Is based on contributions from OECD/INFE European countries, other OECD/INFE resources and desk research

• Uses the first results of the 2015 OECD/INFE survey on financial literacy and inclusion for European Countries

• Benefited from the financial support of VISA Europe Turkey and its member banks

RATIONALE : A variety of circumstances, but common trends :- Shifting responsibility for key risks- Households’ (over-) reliance on credit- Relatively strong financial consumer protection- High level of financial inclusion with exceptions- Low levels of financial literacy

Financial Education in Europe

|

Increasing Longevity and Pension Reforms

Notably as a result of increasing longevity, most European countries underwent pension reforms to improve financial sustainability of welfare systems:

• Lower replacement rates for future generations • Greater reliance on private pension provision to improve

adequacy• Shift from Defined Benefits to Defined Contribution in some

countries

→ More consumers’ responsibility for their future retirement income (and pay-out phase in some countries)

|

Increasing Life expectancy in Europe 1990-2014Au

stri

aBe

lgiu

mCz

ech

Rep

Den

mar

kEs

toni

aFi

nlan

dFr

ance

Ger

man

yG

reec

eH

unga

ryIc

elan

d Ir

elan

dIt

aly

Lith

uani

aLu

xem

bour

gN

ethe

rlan

dsN

orw

ayPo

land

Port

ugal

Russ

ia

Slov

ak R

epSl

oven

iaSp

ain

Swed

enSw

itze

rlan

dTu

rkey UK

0

10

20

30

40

50

60

70

80

2014 or latest available yearLife expectancy at birth 1990 or first available year

OECD (2016), Life expectancy at birth

|

A sizeable proportion of the population borrow to make ends meet in some countries

Belgium

United Kingd

om

Norway

Hungary

AustriaFra

nce

Czech Republic

Poland

Netherlands

Portuga

l

Estonia

Croatia

Lithuan

iaRussi

aLat

via

Albania

Turkey

6% 7% 9% 11% 11% 12% 13% 13% 13%16% 17%

20% 22% 24%26%

41% 42%% of respondents who borrowed to make ends meet

Source : OECD/INFE survey on financial literacy and inclusion, 2016, forthcoming

|

High level of Household debt in some countries

Household debt in % of net disposable income, 2014

Denmark

Netherlands

Norway

Irelan

d

Sweden UK

Portuga

lSp

ain

Finlan

d

Greece

Belgium

France

German

yIta

ly

Austria

Estonia

Czech Rep

Slova

k Rep

Poland

Slove

nia

Hungary

0

50

100

150

200

250

300

350

Source: OECD National Account at a Glance

|

Financial exclusion : generally low except in Eastern Europe

Source: Findex, 2015

Denm

ark

Neth

erla

nds

Unite

d Ki

ngdo

mGe

rman

yBe

lgiu

mEs

toni

aSp

ain

Fran

ceIre

land

Gree

cePo

rtug

alIta

lySe

rbia

Czec

h Re

publ

icLi

thua

nia

Pola

ndSl

ovak

Rep

ublic

Hung

ary

Russ

ian

Fede

ratio

nRo

man

iaTu

rkey

Ukra

ine

Geor

gia

Alba

nia

Arm

enia0

20

40

60

80

100

% of individuals holding a bank account in 2014

|

Decreasing confidence in financial institutions

Percentage points change between 2007 and 2012

-51

-43

-36-34

-32-29

-25 -25 -25 -24 -22 -21

-16 -15 -14 -14 -13 -12-9 -8 -7

-3 -1

1

9

Source: OECD Society at a Glance 2014

|

Low level of financial literacy: Knowledge Few understand the concept of compound interest

Albania

Turkey

Poland

Croatia

Czech Republic

Hungary

Russian

Federati

on

Portuga

l

Lithuan

iaFra

nce

Austria

United Kingd

omEsto

nia

Belgium

Latvia

Netherlands

Norway

16% 19% 21% 22% 22% 24% 27% 30% 31% 34% 36% 36% 38% 39% 44%56% 58%

Calculated 2% interest and correctly identified the impact of compounding over 5 years

Source : OECD/INFE survey on financial literacy and inclusion, 2016, forthcoming

|

Low level of Financial Literacy:Few individuals set long term goals

Poland

Czech Republic

Netherlands

Estonia

Albania

Hungary

Latvia

Norway

Turkey

United Kingd

omCroati

a

Russian

Federati

on

Lithuan

ia

Portuga

l

France

Belgium

Austria

32%39% 39% 40% 41% 43% 44% 44% 44% 45% 45% 47% 51% 52%

61% 62% 65%Sets long-term financial goals

Source : OECD/INFE survey on financial literacy and inclusion, 2016, forthcoming

|

Low level of financial literacy:Minimal effort when choosing products

AlbaniaAustr

ia

BelgiumCroatia

Czech Republic

Estonia

France

HungaryLatvi

a

Lithuania

Netherlands

Norway

Poland

Portugal

Russian Federation

Turkey

United Kingdom

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Shopped around and used independent info or advice for most recent purchaseSome attempt to make informed decision

Source : OECD/INFE survey on financial literacy and inclusion, 2016, forthcoming

POLICY RESPONSES

Financial Education in Europe

To change this text choose menu Insert > Header and Footer |

National Strategies for Financial Education (NS)

|

Steady development of National Strategies in Europe (2012 – 2016)

Source: Financial Education in Europe, OECD 2016

|

NS main objectives

The overarching purpose of these NSs is to strengthen financial literacy,

promote positive financial behaviours and improve financial wellbeing

Reducing over-

indebted-nesse.g., Croatia, Estonia, Latvia, Netherlands,

Portugal, Serbia, Turkey, United Kingdom

Improving long-term

saving e.g., Croatia,

Netherlands, Portugal, Serbia, Spain, Turkey

Improving financial inclusion

e.g., Croatia, Estonia, Latvia, Portugal, Romania, Turkey

Comple-menting financial

consumer protection

e.g., Estonia, Denmark, Latvia, Portugal, Spain,

Poland, Turkey

Supporting pension

reforms and retirement planning

e.g., Latvia, Netherlands, UK

|

Governance structure and stakeholders’ role : Different approaches with similarities in practice…

NS Governance varies across Europe

but coordination mechanisms between finance/education public authorities,

private sector and non-profits are generally in place

Multistakeholders approach

Establishment of platforms/networks or coordinating bodies

to design and implement the strategy

With a leader

Denmark, Estonia,

Netherlands

With shared

responsibilitesCzech

Republic, Spain and Portugal

Leadership approach

Armenia, Latvia, Slovenia, Sweden, Turkey, Russia, the

UK

Private sector’s involvement and its monitoring is

also a key feature Certification systems or codes of conduct often voluntary

but linked to an official recognition of programmes within the NS

Czech Republic, Netherlands, Portugal, Slovenia, Spain

|

Main Target Audiences

Women e.g. Turkey

Migrants Portugal, Spain,

Sweden

Elderly people e.g. Portugal,

Romania, Slovenia, Spain, Turkey, United

Kingdom

Low-income groups e.g. Latvia, Portugal,

Romania, Russian Federation, Turkey

Young people e.g. Czech Republic,

Estonia, Latvia, Netherlands, Poland, Portugal, Romania, Russian Federation,

Serbia, Slovenia, Spain, Sweden, Turkey, United

Kingdom

SMEse.g. Portugal,

Romania, Serbia, Turkey

Otherse.g. Pre-retirement,

disabled, etc.

|

Financial Education in Schools

Provision of financial education in schools is uneven and limited (up to schools/teachers, little professional development, no examinations), but growing

National standards / Learning frameworks

(e.g. the Czech Republic, the Netherlands, the

Slovak Republic)

Integrated in school curriculum in another

subject (e.g., England and Spain)

Pilot projects in limited number of schools before

scaling up (e.g., Italy, Russia and

Spain)

CHALLENGES AND FUTURE DIRECTIONS

Financial Education in Europe

|

Challenges and Policy Directions

Coordination between financial education and other policy interventions

Use financial education as a complementary tool/ in synergy with other policy interventions

(social reform, regulation and consumer protection)

→ Adopt a flexible and innovative approach and avoid silos : Evaluate innovative (digital) means to deliver tailored and in time information and education

Use a combination of regulation, information and education to support consumers

Secure mandate and independence

Partner and use incentivesDiversify funding, plan,

evaluate

Strengthen the enabling environment

Develop evidence and applied research

Segment the audiencePilot different types of

intervention

THANK YOU!

Flore-Anne.Messy@OECD.ORGwww.financial-education.org