Lack of financial literacy is a global challenge

In Portugal, financial literacy and financial education programs are needed to encourage savings and investment.

Leonor Mateus Ferreira, Bárbara Barroso, João Queiroz, Miguel Ferreira, and Sofia de Sousa Vale, in the debate ‘The Impact of Savings and Investment’. "Taxes are important, but we shouldn't rely too much on taxes as a way of encouraging savings, when the root of the problem is the population's lack of financial literacy and financial knowledge. It's not just a problem in Portugal, the lack of literacy finance is a global challenge", said Miguel Ferreira, professor of Finance at Nova SBE, at the round table on the Impact of Savings and Investment, at the 13th edition of the Grand Conference The Future of Financial Markets, organized by Negócios and Banco Carregosa, and with the support of ISCTE Business School.

There are many studies on financial literacy, which use surveys with five basic questions about finance, related to inflation, diversification, compound interest, etc. Of the world's population, only one third answers three of the questions correctly. In the European Union, only half of the population has reasonable basic financial knowledge.

"In Portugal the situation is even more serious, only 40% have this knowledge and we are the second worst in Europe ahead of Romania. This lack of financial knowledge requires national strategies to attack the problem", says Miguel Ferreira.

Finance for adults Considers that there is a great lack of public policies based on scientific evidence and financial literacy. "An essential public policy is training in financial literacy, which should begin in the first cycle and accompany the school trajectory. Many studies show that financial behaviors improve with financial education: there are fewer insolvencies and more investment in financial securities", points out Miguel Ferreira.

Furthermore, he argues that literacy and financial education programs are necessary for the adult population in Portugal, otherwise "we will have to wait several generations to reach satisfactory levels of financial literacy".

For Sofia de Sousa Vale, professor at ISCTE Business School, "it is important to introduce a financial literacy discipline, as well as adopting tax incentive measures for savings, but I fear that, without changes in context, such as improving the average income, which is still low Compared to eurozone countries, these broader changes are difficult to achieve." Ignorance and scams The reason for low savings levels is also related to low wages, "but it is closely linked to the lack of financial education, which prevents people from taking risks, as they do not understand the concepts", reinforced Miguel Ferreira.