The financial literacy crisis – Financial Times
Financial literacy education gives young people the foundations for future prosperity — and can help economically disadvantaged people out of deprivation. We bring you the highlights of this Financial Times article “‘We need people to know the ABC of finance’: facing up to the financial literacy crisis” by US-based economist Annamaria Lusardi, a world expert on financial literacy and professor at George Washington University.
Here’s Money Playschool’s take on what stood out for us:
Near-zero interest rates mean savers are no longer able to stash their money away
Squirrelling money away in a boring bank account just doesn’t work anymore, given the near-zero interest rates from savings accounts which would be ravaged by inflation over time. As a result, the financial decisions that people must make to save for retirement have become vastly more complicated.
Increasingly, people have turned to the stock market as a sensible long-term savings vehicle, but it’s one that presents many opportunities to make disastrous mistakes for those uninformed.
The risks from the explosion of online day trading and cryptocurrency speculation
The explosion of online day trading and cryptocurrency speculation has meant the young are more vulnerable to immolating their savings or even getting into trading-related debt, than ever before. There are fears that people are chasing higher returns without realising they are taking on a lot of risk.
“Everyone is a genius when the market goes up, but the important thing is what happens when the market goes down.”Annamaria Lusardi, a world expert on financial literacy and professor at George Washington University
Highly educated people are similarly prone to lacking basic financial knowledge
A key point to note from the article is that highly educated people, even those with postgraduate qualifications, are similarly prone to lacking basic financial knowledge and making disastrous decisions with their money.
And medical doctors are probably some of the worst offenders, often at risk of falling for scams, she said.
Lusardi believes that childhood education in financial literacy is critical.
At Money Playschool, we, too, believe that financial literacy education should start young. But more importantly, it is never too late to start learning and taking control of your personal finance.
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Read the full article on Financial Times here: ‘We need people to know the ABC of finance’: facing up to the financial literacy crisis