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The importance of financial education

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(ARTICLE WRITTEN BY MARK VELLA)

As a practitioner within the finance community, I cannot but stress the importance of financial education on the local scene. I am not the first and will definitely not be the last to state that financial education, apart from the endless number of branches/types of education we receive throughout our lifetime, is essential for one’s wellbeing, from adolescence till retirement/pension age. The type of education which should start from secondary school (some might suggest that should be introduced and form part of the primary educational syllabus) and be on-going in order to keep abreast with the ever changing dynamics of the markets and environments within which we operate.

The global banking and financial market community are passionate about instilling a sense of ownership in investments and interest in market, and considers financial education as a very important issue to be tackled actively. Scholars are of the opinion that financial education in itself empowers consumers and gives them a better know-how of how to manage their finances. More importantly, it provides the necessary groundwork and tools for individuals on how to avoid unnecessary risks and even taking on unnecessary debt piles. Furthermore, it enables people to improve their understanding and broadens the way they perceive financial opportunities and financial products (and the underlying risks and benefits assigned to them) which become available from time to time. Within the EU, stringent and robust regulation is in place for banks and service providers to ensure that these oblige in providing clear and comprehensive information on any financial products which are offered to their respective customers.

And this is where I highlight the importance of financial education. What is the use of providing customers/prospective investors with a flurry of information and array of investment solutions if they are not in a position and/or do not have the necessary knowledge to understand and digest all this information? It is therefore clear that service providers on one hand are duty bound to provide the relevant information to consumers, but the consumers also need to do their part and educate themselves – they cannot be seen in isolation and are tantamount for investors to be steered into the financial products most suitable to their needs.

It is no surprise that, globally, there exists a rather low level of understanding of financial matters as well as of basic economic concepts, which renders even the most basic of financial products to appear complex to the average customer/investor who has not been exposed to any sort of financial education. This leads them to fail to plan ahead or to choose products that meet their investment requirements and hence could result in experiencing difficulties in the event of some unexpected adverse circumstance. Even worse, if bad investment decisions are taken along the years, it will make it even harder for individuals to ensure a satisfactory standard of living in retirement. Therefore we can safely say that financial education all boils down to improving the financial well-being of individuals and society.

Clearly, I cannot but stress the importance of promoting financial education amongst students at an early age, as the knowledge and skills acquired by them at this age, will provide them with a solid background on market knowledge throughout their lifetime.

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