Financial education for a sustainable future

“Thinking in Generations” – this is the creed of Liechtenstein’s financial center. Today it seems more important than ever. The current major upheavals in the global financial system clearly demonstrate the importance of long-term and sustainable thinking and action. In Liechtenstein, we live by our creed: stability, long-termism, and sustainability are part of our financial center’s DNA. And in very different ways. 

For example, the banking center’s core capital (Tier 1 ratio) of over 20% is impressively high by international standards and contributes to Liechtenstein’s financial resilience.

We understand “sustainability” as the ability to meet the needs of today’s generations without endangering future generations. This means not just using our natural resources responsibly, but also acting in a way that benefits individuals and society as a whole.

As a “good citizen,” Liechtenstein’s financial center has long been promoting various social initiatives that are geared toward long-term benefit. One of these is our support for developing the ability of people – both young and old – to recognize financial connections. In other words, to keep their own income and expenditure in balance. Or, to resort to technical jargon, to improve their financial literacy. 

Early financial literacy is vital

There are five commonly defined components of financial literacy: 

• earning
• spending
• saving and investing
• borrowing
• protecting

All of us should learn this “ABC of financial literacy” as young as possible, as it can prevent major financial problems for us later in life. Studies show that one in five young people between the ages of 12 and 18 already has debts. Among young adults aged 18 to 24, the figure rises to one in three. And let’s not fool ourselves: entering adult life in debt is a false start that is difficult to correct. 

All this is well known. That is why we are always surprised that the multiplication tables of financial literacy do not have the same status in school curricula as, say, the battles of the ancient Romans or Greeks. To put it another way: the vast knowledge you acquire at school does not prepare you for managing your finances in adulthood. 

A youth study by the German Banking Association also makes it clear that money is central to young people’s lives and that they want more financial education. Two-thirds (68%) said they had learned “not so much” or “virtually nothing” about economics and finance at school. In contrast, almost three-quarters (71%) of the 14 to 24 year olds surveyed said that information on money matters was important (53%) or very important (18%) to them. 

Banks can fill the gap

We need to close this financial knowledge gap. And that is why we, as a banking association, have been committed to improving the financial literacy of children and young people in a sustainable way since 2012. 

For example, we recently took part in various activities in European Money Week, an annual initiative of the European Banking Federation. We are also one of the sponsors of the picture book Money for Sale! In it, children aged between four and eight answer questions about money in a playful way. 

People are confronted with a plethora of financial decisions throughout their lives, especially when starting adulthood. For example, research shows that young, male, urban singles are most likely to live beyond their means. Buying things on credit is no longer seen as a bad thing, and is often modeled by parents. For this reason, we focus our efforts on the graduating classes of secondary schools, and have developed a successful half-day project – “Banking 4 you – debt prevention” – specifically for this target group. Since 2012, we’ve helped more than 2,000 pupils be better prepared for the financial challenges of adult life.

Advocating for higher financial literacy is therefore another, important facet in our efforts for a more sustainable world. It also ideally fits with “Thinking in Generations.” On a global level, financial literacy has unfortunately continued to decline over the past 30 years. So it is no surprise that the least successful countries are also the least financially literate. 

Hence, a final thought. Financial literacy promotion is included in various sub goals of the UN’s 17 Sustainable Development Goals (SDGs). But the importance and urgency of improving financial literacy would be emphasized far more if the UN were to make it SDG 18.