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Financial literacy is a vital skill that can help people build fiscal resilience and protect their savings and retirement funds against global economic crises such as the one caused by the Covid-19 pandemic, experts at the Arab Pensions Conference 2021 said on Tuesday.
Smart money skills can have a positive long-term impact on the future of people's personal finances, as well as on governments' economic and social programmes, the experts said during a panel session at the two-day event. Streamed online from Bahrain, the theme of this year's conference is “What should Mena pension systems look like for the next 50 years?”
“Financial literacy … is a life skill and should be mandatory,” said Andrea Hasler, deputy academic director and assistant research professor at the Global Financial Literacy Excellence Centre at George Washington University in the US.
The Covid-19 pandemic tipped the global economy into its deepest recession since the 1930s, with millions of people either laid off or furloughed around the world as movement restrictions were introduced to prevent the spread of the virus.
However, the pandemic also exposed people's financial vulnerabilities and lack of emergency funds to survive difficult economic times, a Charles Schwab Financial Literacy survey conducted in August last year showed.
Half of all Americans would experience financial hardship if they had to meet an emergency expense of $1,000 or less in the next 30 days, the survey found.
“Financial illiteracy is insidious. The antidote is financial education, which gives people the skills they need to make smart money decisions and can help improve their lives,” Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation, said at the event.
“The pandemic has underscored just how critical basic personal finance skills are in preparing for the unexpected. Financial literacy is a survival skill that everyone needs.”
In the UAE, financial literacy has become a key social priority that has been identified by the Department of Community Development — Abu Dhabi through its Quality of Life survey
A 2019 financial literacy survey by Visa showed that 43 per cent of respondents in the UAE aged between 16 and 24 felt they are not ready to manage their own money, while 53 per cent said schools did not prepare them enough to take care of their finances.
“Even those who are highly educated lack the knowledge about how to manage their personal finances, how much to save for retirement because these are difficult but also very consequential decisions that we have to make on a daily basis and not just during a crisis,” Ms Hasler said during the panel session at the Arab Pensions Conference.
“When the economy is doing well and we have record-low unemployment rates, these questions are still here and … need to be addressed and we have to make them so we are responsible for it. So, that's why, yes, financial literacy should be made mandatory and we can start as early as in schools.”
The UAE has launched a number of financial literacy programmes over the past three years to tackle the rise of personal debt in the country. This year, the Authority of Social Contribution — Ma’an rolled out the third cohort of its Ghaya financial literacy programme that aims to empower Emiratis with smart money skills to help them contribute to Abu Dhabi’s long-term economic growth.
In 2019, the Central Bank of the UAE signed an agreement with Emirates Foundation to create a financial literacy programme through the Esref Sah project, while the UAE Banks Federation unveiled a financial literacy handbook in May 2018 in an effort to help consumers manage their money more effectively.