González-Páramo: "We are at a key moment for financial education"

José Manuel González-Páramo, chairman of the advisory council of the Center for Financial Education and Capability, today closed the EduFin Summit meeting at Bancomer headquarters in Mexico City. In his speech, he reflected on the need to increase peoples’ financial knowledge, a matter that takes on special relevance for three fundamental reasons.

In the first place, he believes that the social, economic and demographic changes of recent years have caused citizens to want to make rational and informed decisions in everything related to the area of finance. Among the driving factors of these changes, he underscored the increase in per capita income, which is accompanied by a higher volume of savings; the growing level of indebtedness in recent decades; and the increase in life expectancy, which obliges individuals to view the future with a perspective of 20-30 years ahead.

In the second place, he mentioned the growing complexity of financial products, due to the new distribution channels and the development of new products. And lastly, the digitalization of banking, which on the one hand facilitates peoples’ access to financial services, but also adds a new layer of complexity for new users who do not have experience with digital tools. For that reason, he believes it is necessary to provide them with a suitable knowledge of digital financial instruments.

To his way of thinking, financial education should complement the knowledge of other basic subjects such as mathematics, history or literature. “The better we understand how financial concepts work, the better the we can make decisions”. But the impact is much broader. “The best-informed consumers are the ones that make the best decisions, avoiding over indebtedness, insolvency and other consequences that are so negative, both for the customer and for the financial institution”, he explained. “ And from a macroeconomic perspective, “a higher educational level in the population contributes to the stability of the financial system as a whole, to the creation of new business opportunities and ultimately,  to the continuous improvement of the financial sector and of the economy in general”.

In his closing remarks, the BBVA executive director summarized the principal conclusions of the EduFin Summit meeting, of which he underscored three:

• Financial education is fundamental at educational centers, whether they be primary schools or universities, but it’s more important to maintain financial learning throughout one’s life cycle.
• Using emotions as a lever for designing financial programs can be particularly important in the area of responsible saving and preparation for retirement.
• Digital transformation opens an enormous range for developing financial literacy programs through online programs or cell phones.

The BBVA Group has a financial education program with a global reach, in which it has invested $75 million (more than €67 million) since 2008. The program has benefitted more than 9 million people and 150,000 small- and medium-sized businesses (SMEs). Likewise, the Center for Financial Education and Capability created by BBVA has brought together – in only four and a half months of operation – 42 academic studies of reference and 15 practical cases. On Twitter, the Center has more than 10,500 followers.