The financial literacy of children and young people is well below the level we should be hoping for. At the same time, society is encouraging us to take a higher responsibility and make more decisions about our private finances.
But what does this mean for the children and young people growing up today and how can we best support them?
In this blog post you will learn the teacher Erik Wennstam's view of the current situation. Erik, who took matters into his own hands and wrote the book ‘Du och Dina Pengar’ (‘You and Your Money’), is driven by democratizing financial understanding and aims to provide children and young people with the conditions they need to become financially independent.
The people who are often closest to our youngest generation and who are allowed to take a part of their thoughts, feelings and behaviors on a daily basis are in fact our teachers. Their mission; to give our children the conditions they need to get ready for their future as independent individuals is, to say the least, honorable. Erik Wennstam, a high school teacher in psychology, Swedish and mental training, is really passionate about his job and takes his role very seriously.
For him, it is difficult to accept that economics is still just a small part of schooling and that the curriculum does not include financial education as one of the main subjects. As a change in the curriculum does take time, he decided to write the book ‘Du och Dina Pengar’ in the hope of helping individuals learn the most basic knowledge of finance and the management of money. Upon reading the results of the OECD's latest PISA survey, Erik’s thoughts on this recent study are clear and succinct, as follows.
“Financial literacy does not solve all problems, but the lack of it definitely has many negative and costly consequences at both an individual and the societal level. We need to highlight the aspects by which financial skills affect an individual's self-image, mindset and goals and that it creates the conditions for an independent and equal life in which one becomes part of a democratic society. "
What does research say about our financial understanding?
According to the OECD's latest PISA survey, today's financial understanding among young people is at a worryingly low level. 43% of the young people participating in the OECD study showed an economic understanding at levels of 1-2 on a five-degree scale where 1 corresponded to the lowest level. According to Erik Wennstam, these results are “alarming”.
“Financial confidence and financial understanding are a public health issue. Compare, for example, the issue of general swimming skills; society believes that sports and health are an overly important public health issue to hand over to the home to take response for. I want this PISA's results to make it clear that private economics, like sports and health, should become a given subject in the school. "
Erik Wennstam thinks above all, that financial literacy is a matter of democracy, equality and class differences. He believes that low financial literacy increases the risk of young people falling into disadvantage as they step into adulthood. According to Erik, financial ignorance has a negative impact on both a person's social life and his or her private economy and also the opportunities to do well in the labor market too. The fact that the results of the PISA study also indicate that females as a group express greater fear of ‘risk-taking’ and that the test results are somewhat lower in ‘immigrant youth’ as a group. These are additional elements which Erik sees as a risk factor.
“Economic education is one of the most important factors when it comes to real gender equality and bridges the issue of gender or social background. That we continue to keep this knowledge in the public school in the margin is almost a betrayal of today's young generation. Besides, we do it completely unnecessarily, it should not look like this. "
What would increased financial responsibility mean?
In the context of our digital development and the progress of society, we nowadays have an ever greater opportunity to decide for ourselves how we want to invest our money and how much risk we want to take. We also choose when and where to shop, and within a few clicks we can choose to borrow money on credit without any major question marks.
The risk that we can spend without thought or that we take loans that we cannot repay is an imminent danger. At the same time, economics is only a minor element of school education as it is one of many parts of what is known as ‘hem - och konsumentkunskap’ (‘home and consumer knowledge’). Therefore, the great responsibility in fact lies with parents, but the majority of all parents lack an educational or financial education themselves, which means that many people find it difficult to talk about money at home as a consequence.
Of course, the combination of a low financial understanding, increased financial responsibility and inadequate personal finance education is not advantageous, but it is still too early to determine what the consequences will be. However, Erik believes that we will face a major challenge when today's children reach the age of 18 and must navigate themselves in a financial landscape which they have limited knowledge of. According to figures from Kronofogdemyndigheten, this concern is justified.
Kronofogdemyndigheten describes how more and more people are applying for debt restructuring and that young people form an over-represented group on this issue. Per-Olof Lindh, Head of Unit at Kronofogden, believes that these people run the risk of falling into debt traps that they are not inclined to pay off (read more about Kronofogden's statement here: here) .
Do we need financial education in school education?
Erik describes how many subjects follow the students during the whole or a large part of their school time, while personal finance, as he says, only gets to ‘play’. According to Erik, pinpoint actions can be good and it can have a temporary effect, but if you want to create a lasting knowledge that is effective over time, he believes that education must be a recurring element in school. He therefore wants to see private finance as a completely separate, independent subject in the curriculum.
“The most sustainable solution to truly achieve financial literacy, I mean, is to introduce Personal Finance as a whole new, relevant school subject in both primary and secondary education. As long as it is only part of home and consumer knowledge, we should not be too surprised that the level of financial knowledge and skills looks the way it does."
How do you teach economics when all banks and money are digital?
The fact that we are increasingly going to become a cashless society and where all transactions, investments and savings take place digitally is nothing Erik sees as an obstacle. Instead, he thinks that apps like Gimi should be used as tools in financial education.
“At school, young people should discover the economics of apps and other digital tools. All young people are naturally in the digital world and have easy access to and learn from it, which is an advantage. Therefore, using digital simulation, financial planning and transaction overview digitally demonstrates the effect of different ways of saving, spending and investing, which facilitates financial literacy."
He believes that the role for the teacher or parent to fill is to make a screening between all the digital tools and apps that exist when children today are exposed to a variety of alternatives. Gimi is an app that Erik speaks warmly about as it contains the educational aspects of financial knowledge, which many banking apps lack. (Read Gimis manifesto here)
The use of digital financial services and tools is also something that the PISA study shows to give increased financial understanding. Furthermore, the figures from the OECD also show that confidence in using digital financial services and tools, among other things, increases the ability to make more thoughtful financial assessments. On this basis, Erik is adamant that neither school nor parents should ignore or avoid digitization when it comes to financial education. Rather, he thinks it should be used as a tool. (Read more about the OECD's PISA results here)
What does financial ignorance mean from a political aspect?
Talking about personal finance often involves the thoughts of the individual, the family and personal consequences. But Erik thinks it is far from the truth. To return to his description of how society, which is largely affected by a population with low financial understanding, says:
“Politics has probably not fully realized that personal financial knowledge and financial self-confidence are an important class issue, gender equality factor and to a great extent a social concern. Not focusing more on this is to indirectly contribute to maintaining unjust and social gaps."
Erik’s passion for the issue is evident, probably because of his many years of experience as a teacher and his solid commitment to children and young people. Despite his frustration that the curriculum does not yet include financial education, he is still positive. He believes that it is never too late and he is delighted with all of the good initiatives that arise outside of school, simply waiting for the curriculum to change. However, as an end to the interview, he wants to make one thing clear;
“In Sweden, we mean to have a world-class school system for everyone who, according to the curriculum, will equip for the future, promote health, self-confidence, equality and conscious social citizens, financial literacy is clearly a key ability to value significantly higher. No doubt”