General financial literacy

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General financial education, including financial literacy or financial literacy , is a concept that assumes that consumers can be put in a position to acquire financial knowledge and thus, for example, to solve problems in the field of financial services independently . To what extent an increased range of financial education can bring about better financial decisions is, however, controversial in research. General financial literacy must be distinguished from the narrower concept of financial literacy as conceived by the OECD, since financial literacy is only a basic educational concept.

The exact content of general financial literacy is controversial. Consumer organizations understand general financial education as a component of economic education, whereas financial industry associations see financial education more as a preliminary stage in the decision for a specific financial product. The latter perspective also means that private households can manage their finances in a planned manner, master the handling of financial services in banking and insurance transactions and carry out private financial planning independently by making their own decisions . In some cases, general financial literacy is heavily criticized as a concept because it makes individual decisions and attitudes responsible for any financial difficulties. Individual studies on general financial literacy assume that insufficient knowledge and a lack of skills in dealing with money and making use of financial services and consumer preferences are characteristic of many over-indebted households.

General

General financial education is an important task as well as a significant sub-area of ​​economic education, which in turn contributes to general education and should be designed and established accordingly. Since the late 1990s and early 2000s, an international network has developed that promotes general financial education.

Definitions

In a “Working Paper General Financial Education as Part of Economic Education”, general financial education is defined as follows: “General financial education describes the process of developing financial competence. This is understood as the sum of attitudes, motivations, values, knowledge, abilities and skills that enable an individual to competently and responsibly orientate himself on the financial services market, enable him to organize his private finances, to act accordingly and to conform to participate in the analysis and design of the institutional framework in the financial services sector. In addition to the consumer perspective, general financial education also includes the corporate perspective and the regulatory dimension in order to enable a multi-perspective discussion of finance, financial products and the related institutional framework. "

The OECD based the development of the measuring instrument for the pilot study to examine the "Financial Literacy and Financial Inclusion" of adults ("Toolkit to Measure Financial Literacy and Financial Inclusion") on the following working definition: "Financial literacy is a combination of financial awareness, knowledge , skills, attitude and behaviors necessary to make sound financial decisions and ultimately achieve individual financial wellbeing ”.

In the 2012 PISA round, the survey of “financial literacy” was based on the following definition of the OECD, which deviates significantly from this: “Financial literacy is knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life. ”This definition includes cognitive competence facets such as“ knowledge and understanding of financial concepts and risks ” also non-cognitive facets such as the motivation to apply this knowledge in financial contexts.

There are three main differences between these two OECD definitions:

  1. Instead of well-founded or sensible or sensible decisions, effective or appropriate or target-oriented decisions should be made.
  2. These decisions are not intended to achieve or ensure the financial well-being of individuals, but rather to improve them.
  3. Finally, individual financial well-being is expanded to include the social and macroeconomic dimensions: targeted decisions by the individual should also improve the well-being of society. In addition, the individual should be able to participate in economic life. The latter extension brings the concept of financial literacy closer to the understanding of financial education as a sub-area of ​​economic education that is common in German business didactics. The latter comprises three sub-areas that cannot be reducible to one another: the micro-level of the individual who decides, plans and acts, as well as the meso-level of economic inter- / transactions and relationships with other economic actors and, last but not least, the macro-level of the markets, Economic orders and systems as well as political regulation. The emphasis on the "range" of financial contexts, within which individual decisions are necessary, also corresponds with the orientation of economic (or financial) to economic (or financial) life situations, which is widely recognized in German. Therefore, overall, an increasing convergence of the understanding of the term can be ascertained without there being a complete agreement. This is also countered by the fact that the German term of education can hardly be adequately translated into English.

Financial literacy

Financial literacy encompasses both abstract knowledge of fundamental financial relationships and the functioning of financial products as well as concrete experience in dealing with banking and insurance products. The main weak points for consumers are payment transactions , capital investments , borrowing and insurance . According to a 2004 study by the Bertelsmann Stiftung , 47.3% of those surveyed said they were reluctant to deal with finances , 50.2% postponed financial decisions even though 61% had time to do so, and 61.8% felt financial issues as difficult. On the one hand, the basic financial knowledge for appropriate pension and investment decisions is insufficient in large parts of the population; on the other hand, the proportion of correct answers usually increases with educational level and income; respondents also dare to answer the financial questions more often or refuse to answer the less, the higher their level of education or income .

Financial education as a task and branch of economic education

According to the general opinion, economic education serves to prepare people to cope with the demands of economic life situations. Among them, the financially shaped life situations represent a significant subset. Since the individual life situations are innumerable and diverse and also change quickly, no precise, situation-specific qualification is possible. Therefore, technical competencies should instead be promoted in educational processes that can be used in variable situations. Competencies are psychological dispositions that their wearer has to update in specific situations (= performance). In developed economies, basically all individuals are confronted with the following, strongly financial situations:

The economic education treated in their teaching concepts of these aspects, the consumer education grants them - along with other sub-areas - a place once and for subjects such as social studies, civics or politics economy it is sometimes also claimed. Aspects of general financial education will therefore be integrated in economic education in the totality of economic activities, in consumer education in the context of private households or in political-economic education . It makes little sense to deal with financial issues in isolation from economic education.

The aim of general financial education is to enable the individual and the private household to use all financial aspects of their existence sensibly and to their advantage.

Content and scope of general financial education

The main focus of general financial education is finance . This is not about specialist knowledge of special financial products or financial instruments , but rather about conveying the modes of operation and economic relationships and understanding the phases of financial instruments or financial contracts:

  1. Determination and evaluation of your own needs
  2. information gathering
  3. Evaluation of alternative courses of action
  4. Contact with providers
  5. decision
  6. Conclusion of contract
  7. Dealing with rights and obligations under the contract
  8. Responding to situations that need adjustment

The central educational goal of general financial education is not only to teach how to deal with money. A sensible use of different financial services must also be the objective in terms of content, and competence in all monetary issues must be built up. The general financial education deals with questions of dealing with life risks , asset accumulation and old-age provision , as well as dealing with loans . In addition, it promotes political judgment regarding the rules for the financial industry and its products.

Financial market regulation and public advisory institutions are seen as an effective alternative to controlling private action through financial education. The partial interweaving of actors and activities of general financial education with the financial industry is criticized.

Questions of the sensible coordination of expenditure and income of private households in order to avoid a debt trap are increasingly moving into the foreground of general financial literacy, because income risks with unchanged consumer behavior have led to an increase in financing risks.

Location of general financial education in schools

In schools, general financial education is offered on a cross-subject, interdisciplinary basis and in individual subjects such as economics, social studies or community studies, depending on the state and type of school. In terms of content, it is traditionally in the context of consumer education; for some years now, attempts have been made to integrate it more into economic education.

Content area Subject area example
Private households Consume Needs and income
Economic action in the household handling money
Consumers in business Consumer behavior , money functions
Private households in economic activity Investment , old-age provision , wealth creation
Companies The company in business Operational performance process
Markets and Pricing Capital market , loans , investment
Country Functions of the state in a market economy order Social security , poverty prevention
Economic order Economy needs rules Pocket money paragraph
Social market economy Monetary order, monetary policy
foreign countries international economic Relations International finance , European economic policy

References to empirical studies

The Save study examines, among other things, the state of general financial literacy in Germany. In 2004, an empirical study by the Bertelsmann Stiftung showed “that financial literacy in Germany is not doing well. At the same time it became clear that financial illiteracy can lead to the fact that self-reliant provision does not do justice to the individual situation or is permanently postponed ”. In the US, a 2010 study by the Centers for Economic and Entrepreneurial Literacy (CEEL) found: "An overwhelming number of Americans are unable to answer even the simplest questions about credit, interest rates, and basic economic terms." In the English-speaking world and in English specialist literature, this phenomenon is generally referred to as the “financial literacy problem”. Current results on general financial literacy emerge from the FILS study, which has been carried out in Germany since 2013. The FILS study examines a test instrument to measure “financial literacy” among schoolchildren.

PISA 2012 & 2015: Additional option Financial Literacy

In 2012, as part of the Program for International Student Assessment (PISA), the financial literacy of fifteen-year-old schoolchildren was surveyed for the first time. The following countries made use of this additional option: Australia, Belgium (Flemish part), Estonia, France, Israel, Italy, New Zealand, Poland, Slovak Republic, Slovenia, Spain, Czech Republic, USA as well as Colombia, Croatia, Lithuania, Russian Federation, Shanghai -China. The follow-up survey took place in 2015. According to the decision of the Conference of Ministers of Education and Cultural Affairs, Germany did not take part in this additional survey of financial literacy in either 2012 or 2015.

Both surveys are based on a framework concept (“Financial Literacy Framework”). The OECD defines “financial literacy” as “knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well -being of individuals and society, and to enable participation in economic life. " (P. 144).

In this framework, the content areas, thought processes and areas of life are presented that constitute the domain and form the basis of the international comparative survey of financial literacy.

  • The following content fields are named: (1) Money and transactions, (2) Planning and managing finances, (3) Risk and reward, (4) Financial landscape,
  • The following cognitive thought and judgment processes ("Processes") are identified: (1) Identifying financial information, (2) Analyze information in a financial context, (3) Evaluate financial issues, (4) Apply financial knowledge and understanding,
  • The following lifeworld situation fields ("contexts") are taken into account: (1) Education and work, (2) Home and family, (3) Individual, (4) Societal.

Sample exercises have been published to illustrate them. The tasks actually used in the PISA survey are - as usual - not made public by the OECD. These sample items are criticized in the academic discussion primarily in two ways: On the one hand, they did not test decision-making, as would correspond to the definition of financial literacy. On the other hand, they focused too much on personal finances, which is too narrow for a basic education concept. Against the background of an understanding of financial education as part of economic education, financial literacy must be understood much more comprehensively and therefore not least include system and regulatory issues.

The OECD published the results of the financial literacy survey from 2012 on July 9, 2014. Among the many detailed results, it is noteworthy that - unlike in other domains - no fundamental differences in performance between male and female pupils were found. With the same performance in mathematics and reading skills, male test subjects do better than female test subjects in the majority of the participating countries. In addition, there are significantly more male subjects in terms of percentage in both the highest and the lowest performance level (out of a total of five).

The publication of the results of the PISA financial literacy survey received very little media attention. In science, the construct, the items and the results were critically discussed by the economic didactics of the Financial Education Section of the German Society for Economic Education at scientific conferences. In addition, more comprehensive and differentiated models for determining and measuring financial literacy have been developed.

National strategies for improving financial literacy

Since around 2008 an increasing number of OECD member states have developed and adopted so-called “National Strategies for Financial Education”, for example Spain, Australia, New Zealand and Slovenia. The adoption of such a national strategy is currently not expected for Germany. The OECD names educational federalism as the reason for this, according to which school education falls under the jurisdiction of the federal states.

Implementation in school subjects

According to an inventory, a total of 39 different school subjects in Germany are devoted to aspects of financial education. The spectrum of school subjects ranges from the subject " Economics and Law " (Realschule and Gymnasium in Bavaria and Gymnasium in Thuringia) to the learning area "Arbeitslehre" or "Wirtschaft / Arbeit / Technik" (e.g. in the comprehensive school in Brandenburg and the Oberschule in Bremen) up to mathematics. This fragmentation of financial education in the federal German education system leads to a lack of transparency about the status quo of financial education for the younger generation in general schools. It is doubtful that such a fragmentation of financial education guarantees the necessary prerequisites for a long-term and cumulative development of competencies of the pupils, because according to the pedagogical-psychological theory of competency development this is dependent on both continuous support and a good professional foundation .

The report of the Conference of Ministers of Education and Cultural Affairs (2001/2008) "Economic education in general schools" shows that financial education only occurs in traces in Germany's general schools. The term "financial literacy" does not even appear in the 128-page document. The same applies to key terms such as provision and insurance. For other relevant concepts such as risk and return as well as relevant financial life situations such as borrowing and investing, there are only a few sources. The report of the Standing Conference also includes the subjects of social studies, community studies and politics. There is no evidence for the thesis presented at the beginning, according to which these subjects are a traditional place for financial education.

Financial literacy also contributes to consumer education, although it is not limited to this one perspective on what is happening in the economy. In 2013, the Conference of Ministers of Education and Cultural Affairs passed a resolution to strengthen the precarious situation of consumer education in schools and to orient it through the definition of goals and general principles. According to this, consumer education should pursue the goal of "reflective and self-determined consumer behavior" and promote a "conscious and differentiated judgment in consumer decisions". The Conference of Ministers of Education does not identify financial education as an independent target category of consumer education, but rather as an element of the content area (1) finance, market events and consumer law, even if not literally so called. This content area is next to three other content areas: (2) Nutrition and Health, (3) Media and Information and (4) Sustainable Consumption and Globalization. The thesis presented at the beginning, according to which consumer education gives aspects of general financial education a "central place", cannot be confirmed. The content-related focus of consumer education in schools should be on consumer decisions and consumer behavior, i.e. on a selected life situation of income use and does not necessarily focus on its financial dimension, but also on the "quality of food" as well as data protection and copyright law. Life situations other than consumers (investors, borrowers, policyholders) are only mentioned in one place as an example, i.e. not mandatory. The whole area of ​​life of earning income remains completely unmentioned in this context.

For consumer education - as well as for financial education - there is no independent subject. Such a subject is not required by the Conference of Ministers of Education. Rather, consumer education should be "integrated into the teaching of one or more subjects". The status of financial education in schools therefore remains as uncertain as the status of consumer education as a whole. Large parts of the content areas of financial education are not mandatory. Whether or not these content areas are dealt with depends almost entirely on the individual decisions of your teachers.

In Austria there are numerous initiatives through which workshops for financial education are offered by external experts in schools, among others by the National Bank Austria and the specialist group financial service providers of the WKO Styria.

meaning

Financial knowledge is predominantly viewed as a decisive success factor in participating in business life. Educational deficits in everyday financial matters can lead to insufficient preoccupation with private finances. Problematic financial decisions can lead to reduced returns , loss of assets or over-indebtedness . However, there are also opposing positions. Foregoing financial optimization can be a conscious lifestyle . Over-indebtedness often results from life situations that can be influenced individually ( unemployment , divorce ) and especially from a lack of financial knowledge. But there is an empirical connection between education and the causes of excessive indebtedness .

Therefore, general financial literacy is an important part of:

Ever larger areas of private finances are being externalized through forms of financial services . The politically deliberate deregulation of the financial and insurance markets has increased the variety of offers and thus significantly increased the lack of transparency from the point of view of private consumers. The complexity also increases due to the increasingly complex financial products on offer. In today's societies, these services are therefore not only becoming increasingly important in everyday life, also because they completely or partially replace social institutions such as the family in their social security function (for old-age provision, care and survivors' benefits). Rather, the new market conditions present private actors with considerable information and planning problems, and increased risks arise. The growing volatility in the life cycle due to changing economic conditions, in particular the flexibilisation of employment relationships, and family relationships ( single parents ) mean that people have to adjust their private finances more frequently. The politically defined framework conditions for financial and insurance markets, the influence of interest groups on this policy and its consequences for individuals and households are part of the core of general financial education.

The financial skills are to be strengthened by the consumer learning how to handle money properly and thereby reducing the risk of getting into a situation of over-indebtedness. Improving general financial literacy is therefore suitable for preventing over-indebtedness and helps to reduce the risk of consumer bankruptcies. Competent handling of financial services and consumer wishes can decisively prevent over-indebtedness risks. The imparting of relevant qualifications and their anchoring in school as well as extracurricular education is therefore of great importance.

literature

  • H. Kaminski, K. Eggert, K.-J. Burkard: Concept for economic education as general education from primary level to upper secondary level. Published by the Institute for Economic Education on behalf of the Association of German Banks, Berlin 2008.
  • U. Reifner: General financial education - education as a means of preventing poverty in the credit society. Final project report for the first phase of the project supported by the Federal Ministry for Family, Seniors, Women and Youth. 2003.
  • U. Reifner: The money society. Learn from the financial crisis. Publishing house for social sciences, Wiesbaden 2010.
  • Th. Retzmann (Ed.): Financial education in school. Responsible consumers through economic education. Published on behalf of the German Society for Economic Education, Wochenschau Verlag, Schwalbach / Ts. 2011.

Web links

Individual evidence

  1. ^ Lauren E. Willis: Against Financial Literacy Education . ID 1105384. Social Science Research Network, Rochester, NY March 13, 2008 ( ssrn.com [accessed January 31, 2020]).
  2. ↑ Hans Kaminski: General financial education as part of economic education . Ed .: Institute for Economic Education. Oldenburg 2012 ( ioeb.de [PDF]).
  3. ↑ Bundesverband Investment und Asset Management: Finanzbildung. Accessed January 31, 2020 .
  4. ^ Lazarus, Jeanne: The issue of financial literacy: Low finance between risk and morality . In: Economic Sociology. The European Electronic Newsletter . 2017, p. 27–34 ( mpifg.de [PDF]).
  5. ^ Federal Government, Second Poverty Report: Situation in Germany , 2005, p. 213
  6. ^ German Society for Economic Education: Demands for economic education in general schools. Retrieved March 1, 2017 .
  7. ↑ Marcus Wolf: Ain't Misbehaving. Behavioral Economics and the Making of Financial Literacy . In: Economic Sociology. The European Electronic Newsletter . 2018, p. 10–18 ( econstor.eu [PDF]).
  8. ↑ Hans Kaminski / Stephan Friebel: Working paper “General Financial Education as Part of Economic Education” . Ed .: Institute for Economic Education. Oldeburg July 2012, p. 6 .
  9. ^ Adele Atkinson / Flore-Anne Messy: Measuring Financial Literacy: Results of the OECD / International Network on Financial Education (INFE) Pilot Study . OECD Working Papers on Finance, Insurance and Private Pensions, No. 15 . OECD Publishing, 2012, p. 14 .
  10. ↑ a b OECD: PISA 2012 Results: Students and Money: Financial Literacy Skills for the 21st Century . Volume VI. OECD Publishing, 2014, pp. 144 .
  11. ↑ Johannes Leinert, Financial Illiteracy in Germany: Poor Conditions for Independent Provision , in: Health and Social Policy, No. 3/4, March 2004, p. 29
  12. ↑ Johannes Leinert, Financial Illiteracy in Germany: Poor Conditions for Independent Provision , in: Health and Social Policy, No. 3/4, March 2004, p. 29
  13. ↑ Kaminski, Eggert, Burkard: Concepts for economic education as general education from primary level to upper secondary level. Published by the Institute for Economic Education on behalf of the Federal Association of German Banks, 2008.
  14. ^ Institute for Financial Services : iff Research Area General Financial Education . 2003 (to be found here )
  15. ↑ Markus Hoffmann, The Reform of the Consumer Credit Directive (87/102 / EEC) , 2007, p. 273
  16. ^ LE Willis: The Financial Education Fallacy. Los Angeles 2011. (online)
  17. ↑ L. Möller, R. Hedtke: Who does economic education belong to? Notes on the interdependence of science, business and politics. Bielefeld 2011. (online) ( Memento of the original from May 15, 2011 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 2.7 MB) @1@ 2Template: Webachiv / IABot / www.iboeb.org
  18. ^ Ministry of Education, Science, Youth and Culture: Guideline for consumer education at general schools in Rhineland-Palatinate. Mainz, 2010 (online) (PDF; 382 kB)
  19. ↑ Th. Retzmann (Ed.): Financial education in school. Responsible consumers through economic education. Published on behalf of the German Society for Economic Education, Wochenschau Verlag, Schwalbach / Ts. 2011
  20. ↑ The following presentation follows: H. Kaminski / K. Eggert / KJ. Burkard: Concept for economic education as general education from elementary level to high school diploma, published by the Association of German Banks, 2008
  21. ↑ J.Leinert: Financial illiteracy in Germany: poor conditions for independent provision. oO 2004 (= Bertelsmann Stiftung Pension Study 25) (online) (PDF; 206 kB)
  22. ↑ Nation of the Unsuspecting. on: Spiegel online. November 15, 2010.
  23. ^ Construct validity of financial literacy. In: International Review of Economics Education September 29, 2014.
  24. ^ OECD: Financial Literacy Framework . In: OECD (Ed.): PISA 2012 Assessment and Analytical Framework: Mathematics, Reading, Science, Problem Solving and Financial Literacy . OECD Publishing, 2013, pp. 139-166 .
  25. ↑ Christine Sälzer / Manfred Prenzel: Financial Literacy in the PISA Study . In: Thomas Retzmann (Hrsg.): General economic education in lower secondary and primary level . Newsreel, Schwalbach / Ts. 2014, ISBN 978-3-89974-941-0 , pp. 15-31 .
  26. ↑ Section Financial education of DeGÖB. In: degoeb.de. Retrieved May 6, 2016 .
  27. ^ PISA meeting of the Financial Education Section. In: www.wida.wiwi.uni-due.de. Retrieved May 6, 2016 .
  28. ^ Felix Frühauf / Thomas Retzmann: Financial literacy in Germany . In: Aprea, Carmela / Breuer, Klaus / Davies, Peter et al. (Ed.): International Handbook of Financial Literacy . Springer, 2016, ISBN 978-981-10-0358-5 .
  29. ↑ Economic education at general schools - report from October 19, 2001 as amended on June 27, 2008. In: www.kmk.org. Secretariat of the Standing Conference of the Ministers of Education and Cultural Affairs of the Federal Republic of Germany, 2008, accessed on May 31, 2016 .
  30. ^ Secretariat of the Standing Conference of the Ministers of Education of the Federal States in the Federal Republic of Germany: Consumer education in schools. Resolution of the Conference of Ministers of Education on September 12, 2013 . ( kmk.org [PDF]).
  31. ↑ Financial education by the OeNB - Oesterreichische Nationalbank (OeNB). Retrieved July 3, 2019 .
  32. ^ Initiative for financial education in Styria: for schools and apprentices. Retrieved on July 3, 2019 (German).
  33. ^ LE Willis: Evidence and Ideology in Assessing the Effectiveness of Financial Literacy Education. Los Angeles 2008. (online)
  34. ↑ Markus Hoffmann, The Reform of the Consumer Credit Directive (87/102 / EEC) , 2007, p. 270
  35. ^ Federal Government, Second Poverty Report: Living Conditions in Germany , 2005, p. 215