{"id":5557,"date":"2024-12-10T12:16:45","date_gmt":"2024-12-10T11:16:45","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=5557"},"modified":"2024-12-10T12:16:45","modified_gmt":"2024-12-10T11:16:45","slug":"financial-education-is-not-a-panacea","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/","title":{"rendered":"Financial Education is Not a Panacea"},"content":{"rendered":"

Is organizing financial education courses enough to help people navigate financial markets? Broadening and spreading basic knowledge is undoubtedly important, but finance is a complex subject. The behavior of banks during the last financial crisis shows that advice is not always given with the best interests of savers in mind.<\/span><\/i><\/p>\n

After highlighting the benefits and pointing out the knowledge gaps in large segments of the population, it is essential to pause and consider just how far financial education can take us. If a well-structured campaign could equip individuals and families with the basic knowledge outlined in this column, would that be enough to help them navigate financial markets with ease? Especially during turbulent times, when panic and uncertainty can lead to irrational decisions?<\/span><\/p>\n

Financial Education Initiatives: Worthwhile but Not Definitive<\/b><\/h3>\n

This question is important, especially given the significant investments made by public and private entities, as well as international organizations such as the OECD and the World Bank, to improve financial literacy. In Italy, many institutions work in this area, from ABI to Consob, the Bank of Italy, and individual banks, which often provide “bite-sized” financial education on their websites. The initiatives are so numerous that the Ministry of Economy has established a Financial Education Committee (Edufin Committee) to organize, coordinate, and evaluate their effectiveness.<\/span><\/p>\n

However, not all operators in this field are equally skilled, and some may even aim to educate savers in ways that align with their own interests.<\/span><\/p>\n

Questioning the limits of financial education is essential\u2014not only to weigh the benefits of these initiatives against their costs but also to avoid creating unrealistic expectations about their impact. Overestimating what financial education can achieve could shift attention away from other tools critical for protecting savers.<\/span><\/p>\n

The suspicion that financial education has its limits is both valid and unsurprising. Finance is exceedingly complex. Understanding how markets function, how they are organized, and the instruments traded requires expertise. Risk is inherent in finance and cannot be eliminated. Managing it demands a level of sophistication that is typically reserved for experts. Even professionals, despite their deep knowledge, are not immune to misinterpreting market movements.<\/span><\/p>\n

For ordinary investors, financial advisors play a critical role. However, their advice is not always provided with the sole interests of the saver in mind. Is the knowledge gained from a financial education course sufficient to uncover the true intentions of one\u2019s financial advisor?<\/span><\/p>\n

Perhaps basic knowledge alone isn\u2019t enough. Understanding compound interest, recognizing that mutual funds are less volatile than individual stocks, or accounting for inflation when evaluating nominal returns are useful skills. However, additional expertise, rooted in a deeper understanding of how finance operates, is essential.<\/span><\/p>\n

The Litmus Test of Crises<\/b><\/h3>\n

Financial crises provide a unique opportunity to explore the limits of financial education. During the 2008 financial crisis, I posed this question and analyzed the behavior of a sample of clients from a major Italian bank. These were ordinary savers caught in the turmoil, with their investments spread across various instruments. I assessed their basic financial knowledge and their investment choices before and during the crisis.<\/span><\/p>\n

The crisis, however, did not only affect the savers\u2014it also had a severe impact on the bank itself, which struggled to navigate extreme market illiquidity and avoid collapse. It\u2019s not hard to imagine that in such scenarios, the guiding principle might become “the bank first, then the client.”<\/span><\/p>\n

Beyond the inherent risks associated with investments and the devaluation of assets, savers also face the danger that their bank’s advice may prioritize the institution\u2019s needs over their own. During times of crisis, when banks desperately need liquidity that they cannot access from the markets, one strategy is to capitalize on clients\u2019 reliance on guidance and persuade them to lend their savings to the bank, effectively transferring the risk to them.<\/span><\/p>\n

One way to achieve this is by convincing clients to purchase the bank\u2019s bonds. The figure below shows the percentage of clients holding bonds issued by the bank in the months leading up to the crisis (which began in September 2008) and the months that followed. The two lines represent clients with high financial literacy (solid line) and those with low financial literacy (dashed line).<\/span><\/p>\n

The findings are striking. Before the crisis, the proportion of bondholders was similar among clients with both high and low financial knowledge. However, as the crisis unfolded, the proportion of clients holding the bank\u2019s bonds quickly doubled compared to 2007 levels, regardless of their financial literacy. However, this increase was identical for clients with strong financial literacy and those with limited knowledge.<\/span><\/p>\n

The lesson is clear: while financial education is valuable, it cannot replace robust supervision and investor protection. An educated investor is a better-equipped investor, but even the most astute saver can only achieve so much without effective regulatory oversight.<\/span><\/p>\n

Percentage of Clients Holding Bonds from Their Bank<\/b><\/h4>\n
\"\"
Source: Author’s calculations.<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"

Is organizing financial education courses enough to help people navigate financial markets? Broadening and spreading basic knowledge is undoubtedly important, but finance is a complex […]<\/p>\n","protected":false},"author":5742,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"coauthors":[63],"class_list":["post-5557","post","type-post","status-publish","format-standard","hentry","category-non-categorizzato"],"acf":[],"yoast_head":"\nFinancial Education is Not a Panacea - Rivista Eco<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial Education is Not a Panacea - Rivista Eco\" \/>\n<meta property=\"og:description\" content=\"Is organizing financial education courses enough to help people navigate financial markets? Broadening and spreading basic knowledge is undoubtedly important, but finance is a complex […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/\" \/>\n<meta property=\"og:site_name\" content=\"Rivista Eco\" \/>\n<meta property=\"article:published_time\" content=\"2024-12-10T11:16:45+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.rivistaeco.com\/wp-content\/uploads\/sites\/2\/2024\/12\/Edufin-300x200.png\" \/>\n<meta name=\"author\" content=\"Luigi Guiso\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Luigi Guiso\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/\"},\"author\":{\"name\":\"Luigi Guiso\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/#\\\/schema\\\/person\\\/764bf0d335e3410fdc1160c3352e36f8\"},\"headline\":\"Financial Education is Not a Panacea\",\"datePublished\":\"2024-12-10T11:16:45+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/\"},\"wordCount\":828,\"image\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.rivistaeco.com\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/12\\\/Edufin-300x200.png\",\"articleSection\":[\"Non categorizzato\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/\",\"url\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/\",\"name\":\"Financial Education is Not a Panacea - Rivista Eco\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.rivistaeco.com\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/12\\\/Edufin-300x200.png\",\"datePublished\":\"2024-12-10T11:16:45+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/#\\\/schema\\\/person\\\/764bf0d335e3410fdc1160c3352e36f8\"},\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#primaryimage\",\"url\":\"https:\\\/\\\/www.rivistaeco.com\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/12\\\/Edufin-300x200.png\",\"contentUrl\":\"https:\\\/\\\/www.rivistaeco.com\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/12\\\/Edufin-300x200.png\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/2024\\\/12\\\/10\\\/financial-education-is-not-a-panacea\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"http:\\\/\\\/www.rivistaeco.com\\\/en\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Financial Education is Not a Panacea\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/#website\",\"url\":\"https:\\\/\\\/www.rivistaeco.com\\\/\",\"name\":\"Rivista Eco\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.rivistaeco.com\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/www.rivistaeco.com\\\/#\\\/schema\\\/person\\\/764bf0d335e3410fdc1160c3352e36f8\",\"name\":\"Luigi Guiso\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/b1ca003250ac64787893a603e7f117f0e96b029616265e20fbab5cf14b84bf81?s=96&d=mm&r=g0a18feff6a983f273fbe58cfb00fc2f5\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/b1ca003250ac64787893a603e7f117f0e96b029616265e20fbab5cf14b84bf81?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/b1ca003250ac64787893a603e7f117f0e96b029616265e20fbab5cf14b84bf81?s=96&d=mm&r=g\",\"caption\":\"Luigi Guiso\"},\"url\":\"https:\\\/\\\/www.rivistaeco.com\\\/en\\\/author\\\/lguiso\\\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Financial Education is Not a Panacea - Rivista Eco","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/","og_locale":"en_US","og_type":"article","og_title":"Financial Education is Not a Panacea - Rivista Eco","og_description":"Is organizing financial education courses enough to help people navigate financial markets? Broadening and spreading basic knowledge is undoubtedly important, but finance is a complex […]","og_url":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/","og_site_name":"Rivista Eco","article_published_time":"2024-12-10T11:16:45+00:00","og_image":[{"url":"https:\/\/www.rivistaeco.com\/wp-content\/uploads\/sites\/2\/2024\/12\/Edufin-300x200.png","type":"","width":"","height":""}],"author":"Luigi Guiso","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Luigi Guiso","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#article","isPartOf":{"@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/"},"author":{"name":"Luigi Guiso","@id":"https:\/\/www.rivistaeco.com\/#\/schema\/person\/764bf0d335e3410fdc1160c3352e36f8"},"headline":"Financial Education is Not a Panacea","datePublished":"2024-12-10T11:16:45+00:00","mainEntityOfPage":{"@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/"},"wordCount":828,"image":{"@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#primaryimage"},"thumbnailUrl":"https:\/\/www.rivistaeco.com\/wp-content\/uploads\/sites\/2\/2024\/12\/Edufin-300x200.png","articleSection":["Non categorizzato"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/","url":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/","name":"Financial Education is Not a Panacea - Rivista Eco","isPartOf":{"@id":"https:\/\/www.rivistaeco.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#primaryimage"},"image":{"@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#primaryimage"},"thumbnailUrl":"https:\/\/www.rivistaeco.com\/wp-content\/uploads\/sites\/2\/2024\/12\/Edufin-300x200.png","datePublished":"2024-12-10T11:16:45+00:00","author":{"@id":"https:\/\/www.rivistaeco.com\/#\/schema\/person\/764bf0d335e3410fdc1160c3352e36f8"},"breadcrumb":{"@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#primaryimage","url":"https:\/\/www.rivistaeco.com\/wp-content\/uploads\/sites\/2\/2024\/12\/Edufin-300x200.png","contentUrl":"https:\/\/www.rivistaeco.com\/wp-content\/uploads\/sites\/2\/2024\/12\/Edufin-300x200.png"},{"@type":"BreadcrumbList","@id":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/financial-education-is-not-a-panacea\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"http:\/\/www.rivistaeco.com\/en\/"},{"@type":"ListItem","position":2,"name":"Financial Education is Not a Panacea"}]},{"@type":"WebSite","@id":"https:\/\/www.rivistaeco.com\/#website","url":"https:\/\/www.rivistaeco.com\/","name":"Rivista Eco","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.rivistaeco.com\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.rivistaeco.com\/#\/schema\/person\/764bf0d335e3410fdc1160c3352e36f8","name":"Luigi Guiso","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/b1ca003250ac64787893a603e7f117f0e96b029616265e20fbab5cf14b84bf81?s=96&d=mm&r=g0a18feff6a983f273fbe58cfb00fc2f5","url":"https:\/\/secure.gravatar.com\/avatar\/b1ca003250ac64787893a603e7f117f0e96b029616265e20fbab5cf14b84bf81?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b1ca003250ac64787893a603e7f117f0e96b029616265e20fbab5cf14b84bf81?s=96&d=mm&r=g","caption":"Luigi Guiso"},"url":"https:\/\/www.rivistaeco.com\/en\/author\/lguiso\/"}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/posts\/5557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/users\/5742"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/comments?post=5557"}],"version-history":[{"count":1,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/posts\/5557\/revisions"}],"predecessor-version":[{"id":5560,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/posts\/5557\/revisions\/5560"}],"wp:attachment":[{"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/media?parent=5557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/categories?post=5557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/tags?post=5557"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.rivistaeco.com\/en\/wp-json\/wp\/v2\/coauthors?post=5557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}