The Role of Financial Education in the Path Towards Sustainable Development: A Practical Experience With Students of Secondary Education

The Role of Financial Education in the Path Towards Sustainable Development: A Practical Experience With Students of Secondary Education

Raquel González Castro (University of A Coruña, Spain), Joaquín Enríquez-Diaz (University of A Coruña, Spain) and Begoña Alvarez García (University of A Coruña, Spain)
DOI: 10.4018/978-1-7998-7634-2.ch001
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Financial decisions are present in everyone's daily life. However, citizens do not always have sufficient knowledge to understand the consequences of their decisions and the risks taken. The lack of financial literacy can contribute, along with other factors, to making wrong financial decisions. This is why financial education becomes a key element to achieve a more sustainable and egalitarian future. This research presents a practical experience intended to foster financial education among high school students. The experience consisted in providing training workshops about financial topics, specifically adapted to the students' needs. The students' level of financial knowledge was evaluated and also their level of satisfaction with the experience. Results showed a high level of satisfaction and a significant improvement in their level of knowledge. The research also helped to identify the students' socio-demographic characteristics that explain the differences in their level of financial culture and their capacity for improvement.
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All citizens at some point in their life have to make decisions related to economic and financial issues, such as opening a bank account, requesting a debit or credit card from a bank, buying a house and financing it with a mortgage loan, etc. However, sometimes citizens do not have the necessary knowledge to make these decisions, so they do not understand the risks that they are being taken and the consequences of their decisions (e.g. Cardaci, 2018).

This lack of knowledge is a serious problem from the individuals’ point of view, because it can have a very negative impact on the management of personal finances, but also from the macroeconomic point of view, because it can jeopardize the financial system and the global economy as the global financial crisis of 2007 revealed.

This situation also affects young people. At present they have to face various challenges that did not exist in the past such as the increasing complexity of the financial products or the fast development of the financial market in a context in which the contact among customers and markets is becoming more direct. Likewise, youngsters are holders of financial products (such as a bank account), they make payments from their mobile phones, and they buy products from the internet, which implies the use of credit cards. This means that young people come into contact with financial products and make financial decisions from a very early age. Therefore, it is important that financial education begins at school, as early as possible, to prepare young people for adult life (OECD, 2005; Comisión de las Comunidades Europeas, 2007; Ibrahim et al., 2010; Lusardi et al., 2010; OECD, 2014; Ministerio de Educación, Cultura y Deporte, 2017)

Financial education has been defined by the Organization for Economic Co-operation and Development (OECD) as “… the process by which financial consumers improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being” (OECD, 2005).

The main objective of financial education is that citizens become able to make informed decisions in financial matters. This means that citizens understand the financial products available on the market and are aware of the consequences associated with them. Consequently, financial education becomes a tool of empowerment for citizens that allows them to enhance individual well-being and improve the welfare of the society (e.g. Jappelli & Padula, 2013 Grohmann et al., 2018). This is why financial education is seen as a key element to achieve a more sustainable and egalitarian future or, in other words, it is a tool to achieve sustainable development.

The concept of sustainable development became known with the publication in 1987 of the report Our Common Future, also called the Brundtland Report (Rivera Hernández et al., 2017, López et al., 2018). In this report the sustainable development was presented as the development that “...meets the needs of the present generation without compromising the ability of future generations to meet their own needs” (WCED, 1987). Hence, it is a concept that refers to a certain balance between economic growth, environmental care, and social welfare.

Over the years, this concept has spread to all areas of society and has become more popular, although the decisive boost came in the year 2015 when world leaders adopted a set of 17 global goals for sustainable development that aim to eradicate poverty, protect the environment, and ensure prosperity for all. These objectives are a call for action by all countries and constitute the sustainable development agenda for the coming years.

Financial education contributes to achieving several of these 17 sustainable development goals (SDG), in particular the SDG 4 “Quality education”, the SDG 5 “Gender equality”, the SDG 8 “Decent work and economic growth”, the SDG 10 “Reduced inequalities”, the SDG 12 “Responsible consumption and production”, and the SDG 17 “Partnerships for the goals”. For all these reasons, financial education has become a priority for governments, regulatory agencies, and international institutions. It is also a topic of particular interest to scholars (e.g. Hastings & Tejeda-Ashton, 2008; Lusardi & Tufano, 2015; Elan, 2011; Bayar et al., 2017; Grohmann et al., 2018) and institutions that are trying to develop training initiatives in financial education.

Key Terms in this Chapter

Financial Products: Financial instruments used to formalize an exchange of capitals between two parties. One party needs financing and decide to issue (offer) these instruments to draw funds in exchange for offering a return. The other party has financial resources and decide to offer them by contracting these instruments in exchange for obtaining a return over time.

Responsible Consumption: It is a manner of consumption that takes into account the basis of sustainable development, that focus on protecting Earth’s resources and communities, and improving the quality of life of individuals and the society as a whole.

Financial Decisions: Decisions related to the financial activities that corporations and individuals perform. From the corporate point of view, there are three main types of financial decisions: investment decisions, financing decisions, and dividend decisions. From the individuals’ point of view, there are many types of decisions related to the activities performed by individuals to maintain and increase their wealth.

Personal Finances: It is the process of managing the personal budget over time. Therefore, it means planning and making decisions about financial activities such as saving, investing, spending, income generation, or retirement planning.

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