The importance of financial education for youth
This chapter presents the global trends underpinning the rising importance of financial literacy, from improved financial inclusion and innovation to the transfer of (financial) risks to individuals. It then highlights the benefits offinancial literacy for individuals, and its positive spillovers on the financial and economic system. The chapter also points to the rationale for a focus on youth and in particular on schools. It notably draws on OECD/INFE surveys, desk research and work developed for the preparation of the OECD PISA Financial Literacy Framework.
The importance of financial literacy for individuals
In recent years, advanced and emerging economies have become increasingly concerned about the level of financial literacy of their citizens. This has stemmed in particular from improved levels of financial inclusion and rising middle classes in emerging economies, as well as wide-ranging developments in the financial marketplace, shrinking public and private support systems, and shifting demographic profiles including the ageing of the population. Concern was also heightened by the financial crisis, with the recognition that lack of financial literacy was one of the factors contributing to bad financial decisions and that these decisions could, in turn, have tremendous negative spillovers (INFE/OECD, 2009; OECD, 2009a; see also Gerardi, Goette, and Meier, 2010 for empirical analysis of financial literacy and mortgage delinquency).
As a result, financial literacy is now globally acknowledged as an important element of economic and financial stability and development. In 2012 and 2013, G20 leaders notably endorsed the OECD/INFE High-level Principles on National Strategies for Financial Education, recognised the importance of financial education for youth and called for the identification of potential barriers faced by youth in their access to financial products and financial education, and welcomed Progress Reports on Youth and Finance developed by the OECD on financial education and by the World Bank on financial inclusion (G20 Leaders communique, 2012; G20 Leaders communique, 2013). This attention is justified by a series of tangible trends (OECD, 2005a), which make financial literacy a key life skill for individuals. This includes Asia-Pacific Economic Cooperation Ministers of Finance who recognised “the importance of financial literacy as a critical life skill in the 21st century that can contribute to individual and families’ wellbeing as well as to financial stability in our economies.” (APEC Policy Statement, August 2012)
The following sections present these trends, highlight the benefits of financial education and the importance of its introduction in schools.