Financial education – it’s now or never!

Guest article in the Börsen-Zeitung from 4 November 2024 by Heiner Herkenhoff, CEO of the Association of German Banks.

Admittedly, at first glance, what is starting to happen with financial education in political circles in recent weeks doesn’t look so bad – what is finally starting to happen, I should add. Those who, like me, have been patiently pointing out the importance of financial education for the general population and have been advocating for it to be more widely available, may finally feel vindicated. But – as things currently stand – have we really taken a decisive step towards achieving it? Will we really be able to end the stigma surrounding financial education in the foreseeable future and allow it to take up its rightful place in schools and in the wider society?

There is certainly room for healthy scepticism, but first let’s take a look at how we got here. At the beginning of 2023, Germany’s Federal Minister of Finance, Christian Lindner, and Education Minister Stark-Watzinger presented the key points of their “Financial Education Initiative” and outlined their intention to develop a national financial education strategy in cooperation with the OECD and to create a central financial education platform. Both ministers have now accepted the OECD’s proposal, which, in the words of Germany’s Federal Ministry of Finance (BMF), represents a “milestone” on the path to a national financial education strategy. 

Setting up a foundation to coordinate the work

At the beginning of October, the Federal Ministry of Finance also submitted a draft bill to strengthen financial education. The legislation is intended to further develop the current Stiftung Geld und Währung into a foundation for financial education whose future task would be to coordinate and implement nationwide measures to strengthen financial education “in close cooperation with stakeholders”.

After years – or even decades – of nothing much happening, this represents considerable progress on financial education in just a matter of weeks. But this progress could come to nothing, and all our hard-fought momentum could be lost. Without wanting to exaggerate and sound alarmist, there is one thing we can say for sure: If we don’t act consistently now to tie up all the loose ends of financial education, then the window is likely to close again soon and not open up again in the foreseeable future. A coordinated nationwide effort would be difficult to repeat, if things were to grind to a halt halfway towards our goal. 

But what is the most important thing now? The main thing now is to set out the actual financial education strategy and for the central and local German governments to participate in its implementation. Because one thing is clear: Without cooperation between the federal government and the federal states, financial education will not be included in school curricula and in lessons, as it indeed must. 

Education is a matter for the states; nothing should or will change on that front. But these two levels of government must be on the same page and anchor financial education where it belongs: in schools. If this cannot be achieved, then we will not make any real progress. Sadly, the Digitalpakt Schule (digital deal for schools) was not successful in this regard – the federal government and the states were not able to cooperate properly to achieve their goal. Let us hope that financial education does not suffer the same fate! 

Preparing for retirement provision

There’s no need for me to explicitly list the many arguments in favour of better and systematically taught financial education here. They are self-evident, have been discussed often enough and there really is no doubt any more. Furthermore, financial education also has a national policy facet to it. After all, the German government is currently preparing to reform private pension provision. Their aim in doing so is to make better use of the opportunities available through the capital market, which was not previously possible with Riester pensions. In future, it should be possible to have a choice. This also means that people need to be able to understand what their choices are. 

Taught at school

In other words: Without financial education that is more broadly based across society and without – in this case – a general aversion to capital markets and securities, state-subsidised private pension provision cannot hope to meet the expectations placed on it. And where should knowledge about these topics be taught most effectively, if not in schools. It is also important to note that the BMF and BMBF’s financial education initiative goes beyond schools and, of course, we are very much in favour this. 

All stakeholders – some of whom have been involved in financial education for decades and provide a wide range of services in this area – should also start to work together. It is therefore frustrating and unjustified that in recent weeks teaching offers from the financial sector as a whole have been called into question, and not for the first time. Yet the past 30 years have shown that the financial sector can offer teachers real added value with serious and high-quality teaching programmes, which many of them gratefully accept. It goes without saying that teaching materials of any kind should always pass a quality check prior to being implemented and that the provider must always be clearly recognisable.

We should no longer be fighting yesterday’s battles. Now is the time for pragmatism and decisiveness – at all levels. The private banks want to and will do their part to making progress on financial education, finally.