A conversation with German experts on improving financial literacy
In Germany, as in many European countries, financial education is considered a work in progress. The political process required to develop curricula for children and adults is costly, elaborate and doesn’t happen overnight. Executive editor of the German finance magazine Finanztip Hermann-Josef Tenhagen and Prof. Dr. Gerhard Weibold have been demonstrating with their own projects, however, that you don’t have to wait for political reform to bring about change.
Raisin: Why is Germany so behind when it comes to financial education?
Hermann-Josef Tenhagen, business journalist and executive editor of Finanztip.de: Financial literacy is unfortunately still not on the curriculum all across the country. States like Baden-Württemberg have introduced finance as a school subject. Generally though, the various ministries of education and culture don’t consider the issue important enough. The result is that many young people leave school with little to no financial education. Considering people’s everyday lives, this is simply not practical.
Prof. Dr. Gerhard Weibold, management consultant and the driver behind finanzbildung.de (a German financial education portal): I don’t think Germany is actually more or less behind than other countries with respect to financial education. It was already ten years ago that the European Commission promoted a financial literacy requirement, which resulted in the establishment of an “Expert Group on Financial Education” as well as numerous events, reports and declarations of intent. Nevertheless, while media coverage led to the terms “financial education” and “financial literacy” entering mainstream usage, significant successes in implementation across member nations have failed to appear.
Why has business / finance only just been introduced as a school subject?
Tenhagen: That has a lot to do with the debates we have as a society. I have the feeling, though, that awareness of the subject’s importance is increasing here. Young people leave school and have to start making their first decisions about insurance, taking care of their money and even preparing for retirement. And if they haven’t ever heard of social security, life insurance or equity funds then they’re pretty quickly overwhelmed.
Weibold: We know that adjusting educational goals in terms of content requires protracted political negotiation and a long decision-making process. But we need to remember: better late than never. As far as individual states go, there will always be forerunners and stragglers. Business and financial themes accompany us throughout our lives and shape our standard of living. That’s why I believe a basic finance education is essential, and not only for young people. It’s even more important for adults.
Politicians disagree on whether to teach basic knowledge of finance (taxes, rent, retirement) or entrepreneurship and how to build a company. Where do you think the emphasis should be?
Weibold: Basic knowledge about finance benefits the whole population. Regardless of whether you participate in the economy as an employee or self-employed person. When you start a business and become an employer though, the demands in terms of business and financial knowledge are a lot greater. You’ll need further qualifications since, as an entrepreneur, you’re playing in a different league, so to speak.
Tenhagen: Not everyone is cut out to be an entrepreneur — but everyone is in a position to make smart, rational financial decisions. So it should definitely be mandatory to provide education on the fundamentals of finance, while nurturing entrepreneurial talent can remain an option.
How do you see the criticism from labor unions and teachers’ associations, that big business groups could exercise too strong an influence over students?
Weibold: These fears aren’t unfounded and it’s certainly important to prevent corporations, regardless of which industry, from gaining influence over schools, students or teachers. That’s about advertising but also the content in general. However, this does not exclude businesses — usually banks and insurance companies — from occasionally supporting school projects or making meaningful investments there. It’s a matter of establishing and adhering to clear compliance regulations.
Tenhagen: I agree that the concern is not unfounded. A lot of school materials in circulation today on the subject come from banks and insurance companies and at least potentially serve purposes beyond simply education. It is key that teachers carefully assess whether the materials are neutral or communicate other interests. This should be included as an important objective, that students learn to assess what intent the learning materials’ source could potentially have.
You have both championed improving financial education through your own projects. Whom do your projects target and what services do they offer?
Weibold: The websites finanzbildung.de and finanzbildung.at offer a mix of free and low-cost educational opportunities with the aim of reaching young people and adults throughout Germany and Austria respectively. The topics include important questions around investing, finance and insurance, as well as general financial issues that have been popular over the last ten years on the site finanzbildung.eu. We offer the “€uro Financial Driving License” and have earned a reputation as a disinterested source of independent financial education.
Tenhagen: Finanztip is a non-profit with the objective of advancing consumer education. For some time, we considered how to fulfill this mandate in addition to the usual operation of our website. But it became obvious that taking Finanztip into schools was a good solution, and in the IZOP Institut (dedicated to media literacy and pedagogy) we found a trustworthy partner with whom to implement the project. Our goal is to impart not just the essentials of financial literacy to young people, but also media competence. We’re in the pilot phase of finanztip.schule and are currently developing teaching materials with the participating schools. At the end of the school year we’ll publish a comprehensive finance curriculum that every school in Germany can use. The project’s scope also includes visits with the participating classes to discuss the curriculum with students and receive their feedback. Finanztip.schule is designed for classes from the 9th grade up, lending itself best to high schools, business schools and professional training programs.
Are there countries in Europe that you would consider models when it comes to financial education?
Tenhagen: A number of countries have the problem of poor financial education. But Spain, for instance, has adopted a national strategy to support literacy in this field. Unfortunately due to the federal structure of education in Germany, we don’t expect to see that here. (That’s why it’s important for individual German states to include finance and business on the curriculum.)
Weibold: It’s definitely a positive thing that new initiatives on these subjects regularly get introduced, every few weeks somewhere in Europe. But at the same time the proliferation of content and pedagogical styles makes it hard to identify standards or models. The question of how to encourage the population in financial literacy has been included in broader government programs though — in Austria, for example, quite explicitly — and while that doesn’t offer a model exactly, it’s a very welcome sign.
Thank you both for the conversation!
Hermann-Josef Tenhagen is a finance and business journalist and executive editor since 2014 of the non-profit consumer guide Finanztip. Prior to this he served for 15 years as the executive editor of Finanztest, a monthly magazine from the German consumer organization Stiftung Warentest.
Prof. Dr. Gerhard Weibold is an independent business consultant and chairman of the board of financial education services AG as well as chief executive of a number of organizations in Germany and abroad.