The Taiwan Banker

In the modern era, with the spread of knowledge and training, and the growth the financial industry, popular financial knowledge failed to keep pace with the evolution of the industry, seriously affecting the order of financial markets. Thus, financial education has become a key endeavor for many countries.Improving financial literacy has been a global plan of the Organization for Economic Co-operation and Development (OECD) since 2003. The international community has always regarded it as a cornerstone for improving general survival skills, and maintaining order in the financial markets. Particularly after the 2008 international financial crisis, international organizations such as the OECD, World Bank, and G20 have noted its lessons, and various countries have paid more attention to national financial education.Eliminating financial illiteracy and safeguarding interestsAccording to recent studies, although financial development is bearing an ever closer relationship to people’s lives, the severity of “financial illiteracy” is difficult to imagine. In the U.S., 4 out of 10 cardholders don’t know its interest rate, or even understand the trap of compounding interest. A Cambridge University study found that about 9 million British residents were thoroughly “financially illiterate.” Niall Ferguson pointed out that the lack of financial knowledge is not confined to the general public. Many of his students in his Harvard MBA class did not know the difference between the nominal and real interest rates. He believes that public financial knowledge is insufficient in highly financialized societies like the U.K. and U.S. How can people in these countries protect their financial interests in the future?Cases of financial fraud in Taiwan continue without end. Many people have received messages on Line promising “invest 2,000 yuan to buy bitcoin and receive 20％ weekly returns.” Many people only half-understand virtual currency, and many are been rumored to have fallen for this lure. Such cases can be found everywhere. Particularly with the prodigal growth of FinTech, new financial services arise frequently. Financial literacy is not just a global cause, but a specific weakness of Taiwan!If we ignore financial literacy, one act of imprudence may lead to a financial tsunami. Once, due to lack of financial knowledge, professional financial managers and practitioners aroused a strange sense of awe, envy, and trust. One could hardly imagine that public perception of the whole industry would gradually deteriorate in an era of blind faith, eventually causing a financial storm and deep global recession, with serious losses to welfare. The root cause of this process remains the financial illiteracy. Many people blindly followed high interest rates, without understanding the risks behind them.The United Nations put forward the concept of financial inclusion so that all people can more fairly enjoy the use of financial services. APEC has also compiled its past experience in its 2011-2015 Progress Assessment Report on Financial Inclusion Initiatives, analyzing members’ impressions of inclusive finance. Its main conclusions are that economies should define the concept for themselves to support APEC, as a basis for follow-up discussion and evaluation; digital finance is a way to broaden financial services; and that APEC should review its development to support financial inclusion. The survey also pointed out that financial education needs to be strengthened in all member countries.U.S. and U.K. financial education legislation With the consumption of financial products and services, and its rate of innovation, increasing around the world, finance is becoming more and more complex. As a preventative measure for consumers, financial education has received attention from more and more countries. Developed countries like the U.S., U.K., Australia, and Japan have successively developed vigorous national financial literacy strategies. Even developing countries like India are becoming increasingly aware of the importance of strengthening public financial literacy, and are planning and implementing their own strategies.The U.S. government has paid close attention to this topic, and has strengthened financial education through legislation. Its congress passed the Fair and Accurate Credit Transactions Act of 2003, and in accordance with its Title 5, “Financial literacy and education improvement,” a Financial Literacy and Education Committee (FLEC) was established to implement its national strategy. At present, the FLEC consists of the Treasury Department, in conjunction with 20 federal agencies and organizations, including the Federal Reserve, Financial Consumer Protection Agency, Department of Agriculture, and Department of Education. FLEC formulated the country’s first national strategy for financial education, “Promoting Financial Success in the United States: National Strategy for Financial Literacy,” reviewing the financial literacy situation and laying out key areas for future development.FLEC later released a revised strategy, putting forth and organizing a “Starting Early for Financial Success” initiative. The committee argues that timely financial education during youths’ key development period can influence their subsequent management of financial matters, and the elementary school period is a window to develop financial literacy. Students who receive continuing financial education also show increasingly responsible financial behavior. All 50 U.S. states have established curriculum standards for high school economics, of which 45 are mandatory.The U.K. has is also actively developing and implementing a national financial education strategy. In accordance with the “Financial Services and Markets Act of 2000,” its Financial Services Authority (FSA) set and implemented a public financial education strategic plan. In 2006, the FSA formulated the U.K.’s first national financial education strategy, strengthening its financial education in schools. Afterwards, the U.K. introduced financial literacy into its middle school curriculum, and identified it as a required course. Meanwhile, it also designed financial programs for youth organizations, such as “What money means,” and “My weekly financial plans,” etc., including the concept and use of money, its sources, expenditure, and management, consumption and budgeting, and responsibility in financial activities. Later, in accordance with the Financial Services and Markets Act, the U.K. established a Consumer Financial Education Bureau (CFEB), later renamed the Money Advice Service (MAS), taking over the responsibilities of the FSA on financial education. MAS focuses on youth education, and has designed and developed an app aimed at youth to bring them into contact with financial services.Japan fosters savings habits; Taiwan counsels specific ethnic groupsAs early as the 1950’s, a “kid’s bank” model was used in schools in Japan to promote saving behavior. The bank allowed students to deposit and withdraw money from financial institutions through the school, and the students enjoyed a tax exemption on interest earned, helping them cultivate their savings habits. At present, Japan’s financial education is jointly managed by its Financial Services Agency (FSA) – the highest administrative department for financial supervision – and the National Council for Financial Services. In addition to publishing a “Financial and Economic Education Agenda,” the FSA also established the first national strategy for financial education, as well as a Financial Education Research Group composed of experts and officials from relevant government agencies and organization.In 2013, the Research Group set up a future financial education plan, requesting financial education for the whole population, including students, to be strengthened. The National Council for Financial Services actively promotes the inclusion of financial education in school curricula. In 2007, it released its “Financial Education Plan: How to Promote Financial Survival Skills,” asserting the most effective ways to introduce financial knowledge in schools, and providing paradigmatic teaching methods for financial literacy in each main subject in primary and middle school. In the national syllabus published by the Ministry of Education, interdisciplinary methods are used to teach financial literacy. It is integrated into social studies, family economics, and moral education at the primary and secondary levels. Elementary, middle, and high schools also began to hold new classes with the latest financial knowledge.Taiwan should also work to improve financial literacy on multiple levels, particularly for young students. Aside from a scattering of such courses in metropolitan areas, the government has also started to pay attention to such issues. The Financial Supervisory Commission has requested that the Taiwan Financial Services Roundtable design some courses, not just in the hopes that special future financial education will reach rural and aboriginal areas and seniors, but also that it will improve the competitiveness of the entire country!Financial education is not speculative financeIt is important to clarify however that financial education must not be compared with narrow investment management. At present, in the name of financial knowledge, some countries actually teach stock market speculation. The topic of investment is often linked to speculation, which has caused many people to be afraid of investment and financial management. Financial education is not about such paradoxical knowledge, but rather about awareness of one’s responsibilities, rights, and judgment in financial management. In recent years, the views of the Yale University finance processor Robert J. Shiller – one of which is “financial democracy” – have gained increasing attention. Only by increasing the financial judgment ability of the average person can the whole financial service sector progress, thereby reducing financial risks. The purpose of doing so is no less than financial education, judgement, empowerment, democracy, and common prosperity.Professor Schiller points out that advances in modern information management technology, when used properly, have caused great progress in financial prosperity. Due to a lack of financial democracy and empowerment, though, the whole field has become rife with speculative fraud, incompetence, and high risk. The purpose of financial education is not only to teach people to make and manage money, but also to further democracy and well-being.