22 March 2024

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Financial Education: The Most Profitable Investment

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The phrase by Benjamin Franklin, "An investment in knowledge pays the best interest," prompts us to reflect on the fact that when it comes to investments, gaining knowledge is the first step to avoid mistakes. Taking care of our savings requires mastering the basics of finance to make informed decisions, learning the correct behaviors, as well as understanding common mistakes and how to avoid them. It's better to rely on a financial advisor with whom to have constructive dialogue: this allows savers to find the necessary information to understand how to invest their savings and face the market in a less risky manner.

Finance requires constant monitoring, which the less experienced individuals find difficult to do on their own. It is a delicate matter that involves understanding financial tools and continuously updating oneself on the state of the markets: being supported in investment activities is increasingly useful and convenient. This is especially true in a market environment where the explosion of inflation is eroding the purchasing power of Italians, impacting their standard of living (not to mention the rise in interest rates).

Italy has never excelled in financial education: the level of financial literacy among Italians in 2020 ranked 24th in Europe out of the 26 countries analyzed (data from the Bank of Italy, which considered the 3 evaluation parameters used by the OECD: knowledge, behaviors, and attitudes). A legacy linked to our excessive public debt that in past decades has always guaranteed very high returns to savers who received generous risk-free interest. According to the Edufin 2022 Report "Financial Education: Guidance Tool in Times of Uncertainty" conducted by the Edufin Committee in collaboration with Doxa, the proportion of Italians who would like to see financial education introduced in schools and in the workplace is increasing. This is a more than legitimate request given the low percentage of people with a high level of financial knowledge, especially among the younger population, who due to this lack of literacy show little inclination towards riskier investments.

Italians want to invest and earn, but they lack the skills to do so. And the biggest problem is that they are only partially aware of it. A treasure of over 1.6 trillion euros sits idle in cash and current accounts, constantly eroded by rampant inflation (many do not realize that keeping money under the mattress comes at a high cost considering the current rise in the cost of living).

All this despite the vast amount of information available online, as not everyone browsing has the minimum skills to understand it: older individuals cling to the idea that the current account represents a safe haven in a stormy sea, while younger ones chase the illusion of easy gains by investing without a parachute in complex financial instruments after experiencing simplified access to zero-commission platforms. And so the generations change, but not the losses.