Why not include financial training for children?

A study by the broker Degiro in August of this year said that 42% of their clients have no past experience with stock market investments. Several studies broadcast by the famous economic journal The Financial Times showed that the share of private investors​​​​​​​​in the daily trading volume on the exchanges has doubled in Europe and tripled in the United States. What can we deduce from these statistics?

The number of people investing in the stock market has only increased in recent months. I see four possible explanations. First, with the various confinements that occurred, students and employees found themselves at home without any possible hobbies. Therefore, they had much more time to be interested in different investment opportunities, including the stock market.

Then, in this same period, families spent, on average, less. While the household savings rate in the euro area was around 12% between 2010 and 2019, a new Eurostat study published in July 2021 showed that the savings rate was around 21%, on the second highest level in twenty years (the highest being in 2019). second quarter of 2020). The third explanation can be illustrated through behavioral finance and a prejudice in particular: that of breeding behavior. This bias is the tendency to imitate the behavior of those around you in order to be socially integrated.

A comparative analysis

Let’s take a few examples, outside the financial markets. How many of us buy an iPhone after benchmarking the smartphone market? For my part, I have the iPhone 8 because I saw many people who had bought it and were happy. How many of us have bought cryptocurrency after analyzing the cryptocurrency universe? For my part, the only time I bought a cryptocurrency is in January 2018, on the good advice of a friend who specializes in the subject. Regarding stock market investments, many investors, especially among young people, have looked at other people’s publications in social networks and online forums such as Redditt, Facebook, Instagram or LinkedIn.

After repeatedly seeing the spectacular rise of some shares, new people who hesitated to invest in the stock market made up their minds. Finally, many platforms have invested significant sums in marketing to attract new investors.

In addition, some of them mention, among other things, free brokerage fees. We encourage you to ask yourself the following questions about your investment platform. Are you the beneficial owner of the stocks you invest in? Am I protected in case of bankruptcy of my intermediary? Does my broker lend my securities? How does my broker make money? These questions are far from an exhaustive list and provide a better understanding of how online trading platforms work and how they are remunerated.

Take care of your heritage

On the one hand, I can only rejoice to see more and more people taking care of their heritage. Investments in the stock market, like other investments in real estate, for example, allow investors not to lose two or three percent a year due to inflation. They are trying to increase their savings.

On the other hand, I’m worried. I regularly discuss with new people who invest in the stock market and often observe the same observation: a lack of financial education. During my studies in higher education, I did not take a budget management course. My parents gave me pocket money and, at the same time, never taught me how to manage a budget. In college, I learned a lot of technical concepts that are not useful to me to understand my wealth and invest in general.

According to a study by Standard&Poor’s Rating Services carried out in 2015, almost 50% of the Belgian population does not have basic knowledge of financial education. Furthermore, 39% of Belgians do not invest because they do not understand investments.

relationship with money

So, what concrete ways can we put in place to improve financial education as a whole? I see three. First of all, in our Judeo-Christian cultures, talking about money is frowned upon and uncomfortable. How do we want to improve everyone’s financial education if we don’t talk about it and if we are not in a sharing economy? Our relationship with money says a lot about us and allows us to know ourselves better. This first clue is crucial.

Then, in the lower course, a course of one hour per week could be given. What topics can be covered? The expenses of everyday life (shopping, transport, telephone), more exceptional expenses such as the purchase of a car or even real estate, the different types of accounts or the different types of insurance. Different sources of income can also be mentioned, such as wages, family allowances or unemployment benefits. Such a course allows our teenagers to be independent in managing a budget. Finally, higher education and business also have a role to play. Imagine, in every university course and in every company (private or public), one session per week. This session would allow us to discuss different investment avenues. The stock market, real estate, art, wine, cryptocurrencies or gold are topics that can be discussed.

These three ideas have a single objective: to improve the basic financial knowledge of students, workers and pensioners. To get there, they will be able to make financial decisions based on their beliefs, they will become more and more independent with their money and they will be able to decide the meaning they want to give. This is a major social problem.

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