12.07.2019
Youth knowledge and financial education in Spain
BBVA EduFin Summit 2019
Pablo Hernández de Cos
Governor

Good morning, ladies and gentlemen.
I would like to begin my address by expressing my satisfaction at the organisation of this
conference. Its aim is to make society and market participants aware of the significance of
financial education and of the importance of improving citizens' financial literacy. I also wish
to thank the organisers for this invitation. It gives me the opportunity to set out the Banco
de España's view on such a relevant topic.
It is not overstating matters to say that, in my opinion, the level of financial literacy directly
affects citizens' welfare, their capacity to choose, and the capacity of the financial sector to
offer their products and to strengthen their reputation.
The goal of financial education is, precisely, to ensure that people are able to take
responsible financial decisions throughout their lives, in awareness of their rights and
obligations as financial product users.
Financial education is thus a vital tool for the authorities that oversee the protection of
financial users. It adds to and complements the traditional tools of bank regulation and the
supervision of bank solvency and conduct. And ultimately it also contributes to financial
stability.
I would like to focus today on certain aspects of financial literacy in Spain, from an
internationally comparative perspective. Further, I would like to offer some conclusions in
relation to youth in society. This group is closely tied to some of the initiatives that are part
of the Financial Education Plan (FEP), about which I will also speak.
I shall be beginning in a somewhat dismal tone, "dismal" being the label that has been
attached to those of us practising as economists since the times of Thomas Carlyle, back
in the 19th century. And the situation is that, despite all the efforts made in terms of private
initiatives (as exemplified by this EduFin Summit, now in its third edition) and by the public
sector [specifically the FEP initiatives under way since 2008 jointly launched by the Banco
de España, the CNMV (National Securities Market Commission) and other collaborators],
and also despite the general increase in the educational level in Spain, we have not managed
to instil the youngest cohorts with better financial literacy than we have the population as a
whole.
Adult financial literacy in Spain, from an international perspective
We are, at least, now in a position to make this diagnosis. This is thanks to the information
drawn from the recent Survey of Financial Competences, an initiative of the Banco de
España and the CNMV, as part of the FEP. Thus, since last year, our knowledge on the
status of Spaniards' financial literacy and on their interaction with the financial system has
improved decisively.
The Survey is a very extensive study in which over 8,000 people were interviewed and asked
- among other issues - about their financial knowledge; their holding and acquiring of
saving, credit and insurance products; their work-related expectations; and their attitudes
to consumption and saving. It is the most comprehensive, representative and internationally
comparable information source available on Spanish citizens' financial competences.
It is, therefore, a most useful survey. And it is novel regarding the additional information it
provides on the social and economic context in which Spaniards take their financial
decisions. In this connection, it measures competences which, without being strictly
financial, can indeed affect peoples' decisions, such as their degree of reading
comprehension and their ability to understand specific graphics.
The Survey thus provides us with a sound database for assessing our efforts to increase
financial literacy. I encourage you, as specialists in this area, to exploit it by using both its
aggregate findings and its microdata, which are available for research on the Banco de
España's Internet portal.1
With regard to the population's financial knowledge, the Survey shows that an extensive
group of Spaniards are not familiar with basic concepts such as inflation, interest rates or
risk diversification.
To answer correctly the question on inflation in the Survey requires understanding that an
amount of money loses purchasing power when prices rise. 42% of interviewees are not
able to answer this question correctly.
To answer correctly the question on compound interest rates, the interviewee must
understand that the changes in an amount saved in an account depends not only on the
annual interest rate applied to the amount saved the first year, but also on the interest
accumulated thereafter. 54% of interviewees do not manage to correctly answer this
question.
The question on risk diversification measures whether the interviewee understands that
the risk associated with investing in variable income diminishes if a broad range of shares
is purchased instead of a single type of share. In this case, 51% of interviewees are unable
to answer this question correctly. Even if analysis is confined solely to the one-third of the
population that holds some type of financial asset (which, in Spain's case, usually involves
investment funds, pension schemes, shares and bonds), the percentage of incorrect replies
to this question is still 40%. This result would be indicative of the fact that a high number of
financial market participants appear not to be aware of the advantages of a fundamental
aspect for reducing risk in financial decision-making, namely diversified investment.
In any event, the low level of the Spanish population's financial literacy evidenced by the
Survey is not something exclusive to Spain; rather, it is seen worldwide.2
However, in the particular case of knowledge on diversification, and unlike the other
questions, the percentage of correct replies in the population as a whole is significantly
lower than that in other developed countries (49% in Spain, compared with 62% in the
OECD or EU countries).
The results reveal some sex and age-based heterogeneity in the degree of familiarity with
these basic financial notions. This heterogeneity in financial knowledge has been related in
some international studies to actual financial decision-making in households3, such that the
level of financial literacy would be higher in the individuals that actually take these decisions.
That might suggest either some specialisation in this area within the household, or that
financial literacy is acquired through practice.
The results of the Survey also show that the level of financial literacy in Spain increases in
step with the level of educational attainment4, as occurs in other developed countries.
The age profile observed is also relatively common. In Spain, the percentage of correct
replies increases with age up to 54 years. Above that age, the percentage of correct replies
falls and the percentage of interviewees replying "Don't know" increases. Moreover, the
percentages of correct replies are particularly low among youths. Allow me to focus on this
particular group.
Youth financial literacy
According to the results of the Survey, one in five adults in Spain answers the three
abovementioned questions correctly. This proportion is lower among the young. Specifically, only
one in eight of those aged 18-34 correctly answers the three questions.
This gap in knowledge between youths and the total population is somewhat wider in Spain
than in other developed countries5, and is particularly significant in the case of their
familiarity with the effects of inflation6. Regarding this latter question, a high percentage of
youths do not know the effects of the change in the inflation rate on the real value of
fixedrate mortgage payments. Given that, at that age, mortgages are frequently taken out, doubts
arise once more as to whether all the relevant financial factors are being taken into account
when financing a house purchase.
The Survey information also lets us know that both the under-35s and those who live with
their parents tend to delegate their financial decisions to others.7 Specifically, in the total
3
See the results in "Own your worth", UBS.
4
The percentage of correct replies is 13-22 percentage points higher among interviewees with a university qualification
than among those with a primary education.
5
In Spain the percentage of the under-35s who answer the three questions correctly is 72% compared with the
population as a whole. The figures for other countries are:
 In Canada: 28% of the population answer the three questions correctly. The percentage is 23% for youths
aged 18-34. Gap
18-34/total: 82%
 In The Netherlands: 34% of the population answer the three questions correctly. The percentage is 26% for
youths aged 18-
34. Gap 18-34/total: 76%.
 In the United Kingdom: 14% of the population answer the three questions correctly. The percentage is 11%
for youths aged
18-34. Gap 18-34/total: 78%.
6
In terms of the specific questions, those showing the biggest differences are that on inflation (compared with 58% of
correct answers in the total population, 49.5% of individuals aged 18-34 reply correctly) and that on risk diversification
(compared with 49% of correct answers in the total population, 43% of individuals aged 18-34 reply correctly).
7
Specifically, individuals are defined as delegating when, in the Survey, they have answered "No" to the following
question: "We wish to know whether you are familiar with your household's finances. We refer not only to whether you
are familiar with the household's properties, financial products and debts, but also the reasons for specific spending
and investment decisions."
population, 6% of individuals state they are not familiar with their household's finances,
while this figure triples for youths aged 18-35.
These results might be influenced by the high percentage of Spanish youths that live with
their parents compared with other developed countries. Indeed, among the under-35s who
live with their parents, one in three is not familiar with the household's finances.
One novel characteristic of the Survey is that, in those cases in which an interviewee says
he/she is not familiar with household finances, the financial competences of an informed
member of the household have been measured along with the financial competences of the
interviewee. It is seen that, although the percentage of those aged 18-34 who answer the
three questions on inflation, interest rates and risk diversification correctly is scarcely 11%
among the non-informed, the percentage of informed individuals to which the decisions
have been delegated who respond correctly to these three questions is 22%.
These results point, firstly, to the importance of bearing in mind household structure and,
specifically, the different patterns of communal living arrangements of youths in different
countries when making international comparisons in financial literacy.
Secondly, they illustrate the importance of the moment in the life cycle as regards individuals
acquiring financial knowledge.
Moreover, these results, along with those from other available studies, suggest that one of
the main sources of financial literacy in the population is derived from their actual experience
with financial and credit markets, and with economic phenomena. Evidently, the risk is that
the acquiring of knowledge through practice also entails economic costs associated with
inappropriate decisions, or a lack of decisions, derived from an insufficient understanding
of the main financial elements at play. Hence the importance of the initiatives to raise the
population's knowledge and financial education.
Initiatives to raise youth knowledge and financial education in Spain, and the
evaluation thereof
Since 2012, various international OECD and G-20 initiatives have given expression to the
importance of implementing national financial education strategies.
Hence, since the end of the last decade, various initiatives have been launched in Spain in
this area in the public and private sectors alike. Since 2008, the Banco de España and the
CNMV have, in collaboration with other public and private agencies and institutions,
committed themselves to contributing to improving citizens' financial literacy through the
National Financial Education Plan. The Plan has three basic features: i) generality, so as not
to exclude any segment of the population and to cover all financial products and services;
ii) cooperation, within both the public and private spheres; and iii) continuity over time, given
the very nature of the objectives.
As earlier stated, one of the population groups showing the lowest levels of financial literacy
is that of young adults. A key element of the FEP is, then, the promotion of financial literacy
in schools. In the case of schoolgoers, the notion of "financial education" refers to the
teaching of knowledge, skills, behaviour, values and aptitudes that help students take
informed and sensible financial decisions in their everyday life, preparing them to better face
the basic financial challenges they will encounter throughout their adult life.
Starting in the 2012-2013 academic year, and following the pertinent evaluation of a pilot
scheme8, a programme aimed at secondary education students has been developed. It has
been rolled out in educational centres that voluntarily decide to participate in this initiative
and to impart financial education. Indeed, some 500 centres each year throughout Spain
have taken part. The participant centres have educational material provided by the Plan
itself, through the Gepeese portal, so they may be used by teachers according to their own
criteria and programmes.
Complementing this is specific training for teachers, who are provided with supplementary
educational resources (such as games and workshops). There is also an annual competition
for participating pupils. In fact, on 1 October 2018 I had the opportunity to congratulate the
winners of this competition from a school in Plasencia.
In order to gauge the impact of this school programme, inform society of it and seek to
continually improve it, an exhaustive evaluation of the programme was conducted in the
2014-2015 academic year.9
The evaluation of the short-term impact of the programme showed that:

Pupils following the financial education course obtained better results in financial
literacy tests at the end of the year than pupils who did not.

In terms of theme-based content, it was found that the financial education course
especially increased pupils' knowledge in "bank relations" (e.g. opening and closing
bank accounts, the consequences of an overdraft and knowledge of bank fees,
along with the notion of interest rates and their calculation). The impact of the course
was less evident on matters such as saving, means of payment and responsible
consumption.

The financial education course was not detected, however, to have any significant
impact on pupils' decision to have a bank account or card, or on the amount of
money they report they save weekly.

The financial education course did significantly raise the proportion of pupils who
talk to their parents about economic matters.

After having followed the course, the percentage of pupils doing a job at home to
obtain income also increased, which suggests that financial education may lead to
greater pupil involvement in their household's financial matters.

A change in pupils' attitudes was detected regarding their temporary consumption
preferences six months after the financial education course, with their "patience"
increasing when it came to hypothetical money choices. This observed result did
not disappear in an exercise performed three months afterwards, in which it was
proposed to students that they distribute their present and future consumption with
real payments.10
These results point to the pertinence of monitoring over time the pupils evaluated, with
the aim of analysing the effects of financial education in the long term. This is in light of
the potential significance of consumer attitudes in financial decision-making throughout
the life-cycle of individuals. Indeed, such monitoring has already been implemented and
will result in the improved implementation of the programme at educational centres and
the improvement, in turn, of the evaluation of the Survey as a whole.
Conclusion
Allow me to draw some conclusions.
The results of the Survey of Financial Competences show that a very broad group of
Spaniards are not familiar with basic financial concepts that are essential for informed
decision-making in respect of investment and debt.
The lack of financial knowledge is particularly high among youths and the over-65s.
These results justify financial education actions focusing particularly on these groups,
as has been the case with the Financial Education Programme developed by the Banco
de España and the CNMV in recent years.
In any event, it is crucial to systematically evaluate the measures adopted in order to
identify and prioritise those which are most evidently effective. The regular and rigorous
evaluation of public policies is vital for a better definition of their effectiveness, and
access to reliable statistical sources is an essential step for performing these
evaluations. All institutions should contribute, within the scope available to us, to making
progress in this area.
In any event, I should clarify that the Financial Education Programme is only a part of
the set of basic training actions in market conduct, reporting transparency, good
practices, consumer information, financial education, conflict resolution and other
similar areas that the Banco de España, the CNMV and other public and private
institutions are developing. I would thus like to thank BBVA for all its contributions over
the years towards achieving this objective which, as I have said, is so important for
society and its future. The organisation of this conference testifies to this. It allows us to
learn from the experiences of others and, in that way, to better pursue the joint effort of
raising citizens' financial literacy.
Thank you.