Research network analyzes financial literacy in international comparison
30.04.2013
The ability to properly manage one’s personal finances is not very advanced in Germany. Older investors put their money in the stock market where they take enormous risks and even lose their retirement savings while young people accumulate cell phone bills they cannot pay and consumers take out loans with excessively high interest rates to satisfy their need for the latest trend products. "When it comes to financial literacy, Germany is uncharted territory," said Professor Dr. Klaus Breuer, Professor of Economics and Business Education at Johannes Gutenberg University Mainz (JGU). This has negative consequences for both individuals and the overall economy. Studies have shown that young adults in particular could use increased guidance when it comes to handling their money more effectively. Now for the first time, an international research project is investigating which characteristics are important in determining financial literacy. They will then be used to initiate further international surveys. Professor Dr. Klaus Breuer and his Indian colleague Professor Sunil Behari Mohanty are running the project set up by the World Education Research Association (WERA).
According to Breuer, the idea that you are not supposed to talk about money while socializing or within the educational system appears to be deeply ingrained among Germans. In schools, responsible economic management is usually viewed as an interdisciplinary subject – if it is discussed at all – and is often ignored completely. The problems arising from such omnipresent ignorance can be seen in the rapid growth of indebtedness among young adults over the past decade. According to information from the banking association, approximately 8 percent of young adults between the ages of 18 and 24 have had excessive debt in 2012. This figure, however, only includes publicly disclosed indebtedness. Many young people borrow money from private sources such as family or friends.
Is the situation in other countries comparable? Part of the new research project "Financial Literacy – a 21st Century Skill" will be to develop the "First International Handbook on Financial Literacy," a publication to provide basic information on the subject. It is scheduled for release in 2014 and will illustrate the situation in a number of countries. The international network initially includes researchers from the USA, Great Britain, Switzerland, Australia, and Singapore. In a parallel phase, the original seven participants will carry out local surveys that will be coordinated with one another to produce comparable findings. The initiators will then try to win over other countries as partners.
"In the international survey we will be able to see what other countries do differently and learn from that," said Breuer referring to the example of Singapore, where retirement planning is a subject already in schools. Due to the pilot studies carried out as chair of Economics and Business Education, Professor Dr. Klaus Breuer is already aware that future demands in the area of economic education will have to do more than merely pass on information. "Simply providing knowledge transfer is not enough. We also have to look at young people's attitudes towards money and its function as a symbol of power and status." If families are productive in how they treat money, it will have a positive impact on the economy as a whole. "Financial literacy means that everyone handles their financial resources in a manner that supports individual opportunities for advancement and prevents poverty," stated Breuer. "From a societal point of view, financial literacy affects the overall performance of our economic system."