Retail investments may prove to be an important part of one’s financial portfolio. These commodities carry the potential to grow with time, yield significant returns, and greatly improve an investor’s financial future. These days, it is easier than ever to start investing, as technology has made it faster and easier than ever before. 

According to information compiled by the World Economic Forum, about 70 percent of investors are under age 45. That said, many of these individuals lack the financial awareness needed to make prudent investment choices. Because of this, the finance world has quickly recognized how critical it is to provide those who invest and those who are keen to invest with financial education. 

The Complexities of Investing 

Over time, financial safeguards like investment-based retirement plans have eclipsed traditional nest eggs like pensions as a means of securing one’s financial security. Moreover, the pressure to set up one’s financial future is immense, especially when trying to factor in economic downturns, increases in the cost of living, and saving for major expenses like a child’s college education. This stress often forces novice or young investors to make rash choices. 

The Global Financial Literacy Gap

Globally, financial literacy rates hover below 50%, revealing a significant gap in understanding critical financial concepts. For instance, a study by Standard & Poor’s found that only 33% of adults worldwide are financially literate. This gap is evident across various regions. In China, financial literacy rates stand at 28%, while India reports an even lower rate of 24%. Europe performs slightly better, with an average literacy rate of 52%, but the United States, despite its advanced economy, reports only 57% of adults as financially literate. These figures highlight the urgent need for accessible and effective financial education.

Financial literacy equips individuals with the knowledge and skills needed to make informed financial decisions. Individuals committed to attaining this vital knowledge often experience greater returns on their investments, are more able to perform critical tasks like managing debt, and place the necessary emphasis on planning for their future retirements. 

Financial Education Proves Paramount 

The investment world has come to the stark realization that the key to changing these unsettling numbers is by promoting the importance of financial education. For instance, the OECD reports that only 48% of schools globally have integrated financial education into their curriculums. Moreover, many adults feel overwhelmed by the sheer volume of information, much of which lacks clarity or transparency.

While investing offers the potential for growth, it is not without risks. For instance, trading in complex financial instruments like Contracts for Difference (CFDs) can be highly speculative. Without proper education, young investors may misunderstand the risks, leading to significant losses. 

Easier Said than Done 

While committing oneself to becoming financially literate is important, reaching this goal may prove easier said than done. Many investment plans contain financial terms that are difficult for the average layman to understand or whose success hinges on factors that are not always outwardly highlighted.

Addressing the Problem 

Establishments determined to reverse this disturbing trend are calling on numerous societal sectors to join forces to address this problem through initiatives such as:

Early Education 

Childhood learning institutions like primary schools and tertiary institutions like universities are urged to include financial literacy as part of the basic required curriculums. Attaining financial literacy at the earliest possible age renders one more capable of making better choices in the future. Moreover, a recent CFA Institute report has examined the “adequacy of existing policy frameworks governing influencer activity, highlighting the challenges of regulatory compliance and disclosures in a cross-border social media context,” indicating that social media outlets should adopt a stricter policy of policing their sites to weed out individuals dispensing financial advice who lack the criteria or track records to do so. 

Technological Advancements 

The creation of technological advancements like mobile apps provides solid educational tools because they are simple to access and can be employed at the user’s convenience. Furthermore, game designers are encouraged to develop games that promote prudent financial decision-making to inspire younger folks further. 

Workplace Opportunities 

The investment community urges employers to take the lead in educating their staff. Educational opportunities like in-person or online workshops covering critical investment topics heighten the financial skills of those involved. 

No Longer a Luxury 

Sufficient knowledge of investing and finances is no longer a luxury as it can be paramount to one’s future economic well-being. Therefore, it’s important for people to receive an education on these topics as early as possible and continually have this information reinforced as they progress at their workplaces and within their communities.

Disclaimer: This content is for informational purposes only and is not intended as financial advice, nor does it replace professional financial advice, investment advice, or any other type of advice. You should seek the advice of a qualified financial advisor or other professional before making any financial decisions.

Published by Mark V.