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11/07/2005 - The combination of increasingly sophisticated financial products and growing individual responsibility for financial decisions means that individuals in OECD countries need a better understanding of how to deal with financial markets. OECD governments have recognised that they have a responsibility to help them do this.
Amid a growing sense of urgency about the widespread lack of understanding of financial markets among consumers, OECD governments have published a set of principles and good practices for financial education and awareness. These are designed to encourage financial services firms and organisations such as consumer groups and citizen advice bureaux to do more to educate citizens in this area.
But they are also aimed at individuals, who need to know how to manage mortgage and consumer debt and save effectively for their retirement.
"Financial education is becoming indispensable as in our societies the responsibility and risk for financial decisions is shifted more and more to individuals", according to Lorenzo Bini Smaghi, the Chair of the OECD's Committee on Financial Markets which coordinated this work.
Recent surveys in OECD countries show that many people have low levels of financial literacy and even less awareness of the need for financial education. Without improved financial awareness, Mr. Bini Smaghi warns, "we may face serious economic and social problems in the near future."
The recommendations from the OECD include the following:
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Governments and all concerned stakeholders should promote unbiased, fair and coordinated financial education;
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Financial education should start at school, for people to be educated as early as possible;
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Financial education should be part of the good governance of financial institutions, whose accountability and responsibility should be encouraged;
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Financial education should be clearly distinguished from commercial advice and codes of conduct for the staff of financial institutions should be developed;
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Financial institutions should be encouraged to check that clients read and understand information, especially when related to long-term commitments or financial services with potentially significant financial consequences: small print and abstruse documentation should be discouraged;
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Financial education programmes should focus particularly on important life-planning aspects, such as basic savings, debt, insurance or pensions;
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Programmes should be oriented towards financial capacity building, where appropriate targeted on specific groups and made as personalised as possible;
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Future retirees should be made aware of the need to assess the financial adequacy of their current public and private pensions schemes;
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National campaigns, specific websites, free information services and warning systems on high-risk issues for financial consumers (such as fraud) should be promoted.
See the full text of the Recommendation, which is currently focusing on non-school education. A factsheet on financial education can be downloaded here.
For further comment, journalists are invited to contact Spencer Wilson in the OECD's Media Relations Division (tel. 33 1 4524 8118), or André Laboul or Barbara Smith in the OECD's Financial Markets Division (tel. 33 1 4524 9127 or Tel. 33 1 4524 8466).
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