IMPROVING FINANCIAL LITERACY IN EUROPE: CONTRIBUTIONS OF THE EFINLIT PROJECT

Anabela Mesquita1, Paula Peres2, Luciana Oliveira2

1CICE – ISCAP / Polytechnic of Porto and Algoritmi RC, Portugal 2CICE – ISCAP / Polytechnic of Porto,

Abstract

The eFinLit project aims to identify and address specific needs of EU Citizens in financial literacy, use ICT tools and digital literacy to improve EU citizens’ competencies in financial issues, develop a partnership model of a wide range of expert organizations in the fields of training, online learning and literacies and address the challenges of financial management generated by the current economic transformations taking place in EU. In order to attain this objective, eFinLit will use pedagogical approaches, such as the eLearning, online games, peer to peer support, and educational technology tools that are based on the self-interest of the students. The project will also develop appropriate assessment and certification methods. The expected results of this project are, first a state of the art and gap analysis concerning the financial literacy situation in each of the partner countries involved. Then, an online curriculum composed of 8 modules will be developed. Two other expected results are the development of an eFinLit online platform and mobile application Finally, the partnership will develop an adaptation toolkit.

This paper describes the results of the first stage of the project – state of the art and gap analysis -, as well as the presentation of the learning objects for the modules developed so far. There will also be a reflection about the whole development process and implications for the final result of the online curriculum.

Keywords: Project; education; financial literacy; competencies.

1 INTRODUCTION

The current environment can be characterized by an economic turbulence and market shortcoming, where the escalating numbers of low income and unemployed young adults (18-35) constitute a problem, and a challenge to be dealt with in the forthcoming years. In this scenario, a real need for the development of the financial literacy competencies of this target has been identified. This group of EU citizens is one of the largest disadvantaged groups in the European society, constituting almost the 35 % (over 40% for some EU countries) of the total young adults in Europe. According to the Organisation for Economic Co-operation and Development (OECD), economists have already established that low income jobs and unemployment tend to leave a “wage scar”, whereby someone who is unemployed when they should be at the start of their career can suffer from lower than average wages for decades afterwards [2]. Now, recent research from the OECD shows that youth unemployment and low income also does further damage by undermining pension saving, placing millions of young people across Europe at risk of having an inadequate income when they are older. Improving financial literacy skills of such a disadvantaged group in the EU (e.g. low income and unemployed young adults) can have significant benefits for everyone, since good financial literacy skills help individuals to make the most of opportunities based on their available resources, meet their goals, secure their financial wellbeing, and contribute to the economic health of society. Financial literacy skills would allow people to understand the mechanics of the economy and the market, how to deal with daily financial issues, and protect them from slipping in to extremely negative situations [3].

In this context there is a great need to equip those young adult with the tools and the skills to manage their (minimum) income, in a way that will sustain their quality of life and financial flexibility at decent levels, in the long term.

To contribute to improve financial literacy skills, this consortium decided to develop the eFinLit project. The objectives of this project are built on the priorities of the Policy Priorities of the Erasmus+ Strategic Partnerships, 2014, for adults and for all fields. This paper describes the results of the first stage of the project – state of the art and gap analysis -, as well as the learning objects that were developed for the

training modules so far. We also present a reflection on the whole development process and the expected impacts of the final results of the online curriculum.

2 FINANCIAL LITERACY

The OECD defines financial education as the process by which individuals improve their understanding of financial products and concepts; and through information, instruction and/or objective advice develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being and protection [1].

Financial literacy is seen as a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing. A financially literate person will have some basic knowledge of key financial concepts and the ability to apply numeracy skills in financial situations.

Being aware of the importance of having financially literate citizens, some projects were launched a little bit all over the Word, in the last years. For instance, the OECD launched a project in 2003 with the objective of providing ways to improve financial education and literacy standards through the development of common literacy principle. In 2008, the OECD also launched the International Gateway for Financial Education with the aim to serve as a clearinghouse for financial education programs, information and research worldwide (http://www.financial-education.org/home.html).

Some initiatives were also identified in Portugal. We list them below [1]1.

1. National Plan for Financial Education (PNFF) – The objective is to seek to increase the level of financial knowledge of the Portuguese population and to promote the adoption of appropriate financial behaviours.

2. Project Education + Finance - The main objectives of this project developed by the University of Aveiro, in partnership with Caixa Geral de Depósitos, is to raise the awareness of the importance of financial education and to increase the educational community and the population interest for this theme and to include it in the school’s curriculum.

3. Survey on the Financial Literacy of the Portuguese Population - This survey carried out by Banco de Portugal on financial behaviours, attitudes and knowledge of citizens, was essential for defining the appropriate measures to be implemented in the field of financial education in Portugal.

4. Banking Sector Strategy for Financial Education - The main objective of this strategy carried out by Associação Portuguesa de Bancos (Portuguese banking association) is to encourage more and better financial education in Portugal, through information and training.

5. Bank customer website Portal do Cliente Bancário - This website developed by Banco de Portugal aims to provide financial information and education to bank customers, through the promotion of enhanced transparency in the market.

6. Financial education programmes and initiatives for adults and children - The delivery of ASFAC (Portuguese association for consumer credit) programs and projects aimed at raising the degree of financial literacy of adults and children in Portugal has been made through the public media.

7. Financial Education Reinforcement, Insurance Supervisory Authority (ISP) - The Portuguese Insurance Supervisory Authority (ISP) seeks to contribute to the reinforcement of financial education and the creation of a knowledge and a risk`s mitigation culture among consumers.

Besides the initiatives presented above, there are other promoted by other organizations. Among these we will present here the eFinLit project (http://efinlit.eu/).

1http://www.financial-education.org/Portugal_National_Strategy_Financial_Education.html

3 INNOVATION OF THE PROJECT

The eFinLit - Developing Financial Competencies for EU Citizens Utilizing Online Learning and Digital Literacy (2014-1-PT1-KA204-001056) started in 2014 and will end in 2016.

The main objectives of the project are: 1) Identify and address specific needs of EU citizens in financial literacy; 2) Utilize ICT tools and digital literacy to improve EU citizens’ competencies in dealing with financial issues; 3) Develop a partnership model of a wide range of expert organizations in the fields of training, online learning and literacies; 4) Address the challenges of financial management generated by the current economic transformations taking place in EU; 5) Meet the basic objectives of EU 2020 strategy such as social cohesion through digital literacy;

The specific objectives of the project are:

1. The development of basic and transversal skills: eFinLit will directly improve the digital, basic math, and financial skills of young adults, will indirectly improve their language and reading skills;

2. The promotion of innovative and student-centered pedagogical approaches: eFinLit will deploy innovative, student-centered, ICT based pedagogical approaches, such as the eLearning, online games, peer to peer support, and educational technology tools that are based on the self-interest and paste of the students;

3. The development of appropriate assessment and certification methods: eFinLit will support both formatting and summative assessment methods, based on the ECTS. Online certificates will be provided to the eFinLit students upon completion of each module, accredited by the HE and training institutions of the eFinLit consortium of partners;

4. The design and implement assessment of the eFinLit transversal skills as noted above;

5. To provide tangible learning outcomes: The learning outcomes of eFinLit will immediately become visible in the everyday life of the young adults;

6. The validation of non-formal and informal learning: eFinLit encompasses a series of components related to non-formal and informal learning such as access to online data and games, use of multimedia, forums and social networks. The partners will validate these activities provide online certificates to the users;

7. The improvement of funding approaches for skills development: eFinLit would potentially be an improved funding approach for skills development, since through the development of sophisticated, innovative online educational resources and tools can build a wide range of skills of EU citizens.

3.1 Expected Results

As outputs, the eFinLit project carried out a transnational eFinLit state of the Art and gap analysis, and is developing an online curriculum composed of 8 modules: Digital Literacy and Access to Financial Information; Basic Math; Budgeting; Savings; Indebtedness; Credit and Loans; Consumer Rights, Investment and Entrepreneurship.

The identification of these modules was carried out during the development of a previous project, also about Financial Literacy called, FINLICO – Financial Literacy Competences for Adults (see http://www.financial-literacy.eu/index.php?id=29)-). The project also aims at developing an eFinLit online platform and mobile application

The eFinLit backbone is based on ICT which include social networking tools, online games, data bases, and a training packages of online self-regulated modules, which will also be available through mobile platforms. These will include: eLearning platforms, WEB 2.0 networking tools, Mobile applications, Digital material, Videos, Online Management Tools and Social Media.

In order to facilitate the inclusion of the project’s outputs in training/education centres and other agents in the field, an adaptation toolkit will also be developed.

3.2 Partnership

The consortium of the eFinLit consists of 8 partners from 7 different EU countries. Partners come from a wide range of backgrounds including training centres, family care centres, research and development centres, and SMEs. Specifically, the consortium of partners consists of the following:

Polytechnic of Porto (ISCAP) (Coordinator) (PT) (Higher education institution); Innovade Li Ltd (INNOVADE) (CY) (Enterprise); CE.S.CO.T VENETO - Centro Sviluppo Commercio Turismo e Terziario (CESTOT) (IT) (Business association); E-C-C Verein fuer interdisziplinaere Bildung und Beratung (ECC) (AU) (Training Centre); INTEGRA INSTITUT, Institut za razvj cloveskih virov (INTEGRA) (SL) (Training Centre); QUALED obcianske zdruzenie pre kvalifikáciu a vdelávanje (QUALED) (SK) (Training Centre); CENTER FOR ADVANCEMENT OF RESEARCH AND DEVELOPMENT IN EDUCATIONAL TECHNOLOGY LTD (CARDET) (CY) (Training Centre); Institute of Financial Studies (IEF) (SP) (Research Centre);

In the next sections we will present the results of the first stage of the project – the state of the art and gap analysis.

4 ONGOING ACTIVITIES

4.1 State of the Art and Gap Analysis – Presentation of results

One of the project’s first tasks was to determine the state of the art in the provision of training in the areas of digital, financial and math literacies (as the primary direct and indirect fields of focus of the project) through ICT tools, aimed at young adults. This stage also aimed at discussing the gaps in these focus fields and the needs of the target groups among the European partnership.

The methodology adopted to produce the eFinLit State Of The Art and Gap Analysis Report at EU level has consisted in a four-step exercise implemented from October 2014 to the end of February 2015:

1. Identification of the field of investigation and agreement on an operational proposal including the design of the tools and a first set of schedules to complete the research;

2. Issue of a final operational proposal including survey and interviews questionnaires, focus group (field research) and country overviews (desk research), plus the database format that had to be integrated by all partners in EN by mid Feb. 2015.

3. Translations and adaptation: All the partners were requested to:

Translate the questionnaire into their languages if necessary so as to carry out the field research;

Whether insert the survey inputs onto an online questionnaire in EN or TRANSLATE into each language.

Implement the questionnaires in different adult schools and send the results to an excel file to be analysed.

4. Analysis of the results achieved, issue of national reports plus issue of final EU national report.

The universe considered is formed by adults (18-35 years) from Austria, Cyprus, Spain, Italy, Portugal Slovenia and Slovakia. Austria, Cyprus, Spain, Italy, Portugal Slovenia and Slovakia.

Regarding the sample, we have used a methodology called “Judgement sampling”, particularly, purposive sampling, in which each sample does not have a known probability of being selected; that is, in Austria, Cyprus, Spain, Italy, Portugal Slovenia and Slovakia the adults have been identified providing interesting information for the survey according to a freely selection process implemented by the participating organisations. By using this sampling methodology, we have obtained a strategic representation of the universe considered, not due to the size but to the information provided.

4.1.1 Results from the questionnaire

As for the SIZE OF THE SAMPLE, we have had a total of 392 valid questionnaires. The following table shows the geographical distribution of the questionnaires obtained by the partners from Austria, Cyprus, Spain, Italy, Portugal Slovenia and Slovakia (we may also use the official EU acronyms, AT, CY, ES, IT, PT, SI, and SK in this report) in the frame of the eFinLit survey:

Table 1: Distribution of the questionnaires by partner country

As to the structure of the questionnaire table 2 includes its final articulation according to selected indicators that were agreed by the partners in an integration participative process:

Table 2: Questionnaire indicators

INDICATOR ITEM TO ELABORATE QUESTION

Profile of the respondents

Name of person, country, attainment to Associations/organisations/etc., e/mail address

Problems and contingencies to be addressed regarding financial literacy

1. Digital Literacy and Access to Financial Information 2. Basic Math 3. Budgeting 4. Savings 5. Indebtedness 6. Credit and Loans 7. Consumer Rights 8. Investment and Entrepreneurship

Awareness of importance of training to face their problems

• Participation in training courses regarding financial education in the past • Participation in training courses in the past • How much time you ready to invest in training per year?

Educational strategies and formats

• Frequency of use of computer • Participation in ICT related (wholly online or blended learning) training

courses • Use of the Internet for learning purposes • Use of mobile devices for learning purposes (podcast, etc.) • Do you have a smartphone, if yes, which OS (iPhone, Android, other)? • Do you have a tablet, if yes, which OS (iPad, Android, other)? • Do you have internet access? • Do you listen to podcasts? • Do you visit online forums to solve financial problems? If yes, which ones

and what are the main discussion topics? • ...

Rating of specific features of learning and e-Learning courses

1. Quality of learning contents 2. Design 3. Navigation 4. Loading time 5. Text easy to read 6. Easy to use 7. Frequently Asked Questions Available 8. Availability of learning resources (such as blog, forum, Library...etc) 9. Availability and interaction with a tutor 10. Distant 11. Face to face 12. Certification 13. ...

When asked How important to you are the issues listed below? (Rate from most important, 5, to least important, 1), we can see in the table 3 that there was quite a balance in all the surveyed countries even though Consumer Rights (followed by budgeting and savings) seems to be the most interesting subject while Indebtedness (followed by credit and loans), the least.

Table 3 – Rating of problems and contingencies in AT, CY, ES. IT. PT, SL and SK

Problems and contingencies

Average Rating 1 to 5 (5 most 1 least)

AT CY ES IT PT SL SK AVERAGE

1. Digital Literacy and Access to Financial Info

3,35 4,4 3,76 3,65 4,1 4,18 3,4 3,83

2. Basic Math 3,82 4,5 4,19 3,87 4 4 3,4 3,97

3. Budgeting 3,95 4,6 3,67 3,71 4,2 4,18 4,09 4,06

4. Savings 3,4 4,6 3,99 4,19 4,2 4,37 3,49 4,03

5. Indebtedness 3,14 3,8 2,94 3,88 3,1 3,39 3,49 3,39

6. Credit and Loans 2,86 4,1 2,89 3,92 3,5 3,89 3,63 3,54

7. Consumer Rights 4,05 4,6 4,04 4,29 4,3 4,39 3,7 4,20

Results from table 2 indicate that the most important concerns of participants in Europe are related with consumer rights, budget and savings. Of course these concerns vary from country to country. Nevertheless, the referred ones are those mentioned by almost all participants. Cyprus is the country whose results are higher for all items of the questionnaire (almost all items are above 4, except indebtedness with 3,8).

Participation in Professional training courses in the past: Graph 1 illustrates that the situation is quite uneven in the participating countries: most of the participants in the survey had not attended training courses in the past, but in Italy where the great majority (81%) did.

Regarding attendance to financial education, as average 79% of the participants in the survey had not attended training courses regarding financial education in the past (see graph 2).

Regarding Educational strategies and formats, Classroom Training (Instructor Led) seems to be the preferred format (4.05 out of 5) followed by blended learning (3.83). Fully on-line learning received 3.46 out of 5. Table 4 shows the results obtained.

Table 4: Learning formats more useful

AT CY ES IT PT SL SK AVERAGE

Fully on-line 2,54 4 3,37 2,75 3,4 4,08 4,09 3,46

Blended learning 3,16 4,1 3,58 3,69 3,8 4,36 4,12 3,83

Classroom Training (Instructor Led)

4,61 3,8 4,32 4,08 3,7 3,61 4,22 4,05

Graph 1 – Have you attended any training course in the past?

Graph 2 – Have you attended training courses regarding financial education in the past?

We can see that there were not big differences in the rating of the 3 learning formats, but in Austria, Spain and Italy, where Classroom (Instructor Led) learning was clearly preferred.

We also asked how the use of internet was. Answers are in graph 3. As we can see the majority of participants uses internet.

Concerning the frequency of use of computer and mobile devices, the majority of the participants refers using it in a daily basis as expressed in graph 4.

As for the use of smartphones and tablets, the distribution of use is the one presented in graph 5. As we can see, the majority of participants has and use a smartphone. This question was important for the project since the consortium wanted to see if they should adapt the contents of the financial training course to mobile devices.

As for the operating systems, the most used is Android (see graph 6).

We also asked participants if they visited forums related with financial education and what were the topics mostly debated. Answers are those presented in graph 7. Countries where answers were more positive were Portugal, Italy and Cyprus. In Portugal, some respondents (26,3%) visited online forums related with financial education. The most important topics reported were: How to gain the control of your financial life; DSOP (diagnose, dream, budget, save, acronym in Portuguese), Investments; Financial education for dreams, planning, savings; Indebtedness; Financial plan; Financial behaviour; Savings; and Sales.

Graph 3 – Internet use Graph 4 – Frequency in the use of computer

Graph 5 – Use of smartphones and tablets

Graph 6 – Operative systems used in the mobile devices

Graph 7 – Visit to forums concerning financial education

When asked what are the most important characteristics/facilities of online courses that they had attended and/or would like to attend participants reported the following most important characteristics / functionalities:

Quality of content (almost 80% with 5)

Easiness to use (about 75% with 5)

Easiness of reading texts (about 67% with 5)

Navigation

The time pages take to upload is also important.

Table 5 illustrates there and other characteristics / functionalities that were mentioned. The less important characteristics are the availability of FAQ and the possibility to have access to the materials via mobile devices.

Table 5 - More important characteristics / facilities of the online courses that respondents have attended / would like to attend

FEATURES Average

Easy to use 4,36

Quality of learning contents 4,25

Navigation 4,20

Text easy to read 4,21

Availability and interaction with a tutor 4,12

Loading time 4,02

Use of mobile devices 3,94

Availability of learning resources (such as blog, forum, Library...etc.)

3,86

Design 3,64

Frequently Asked Questions Available 3,63

Certification 3,17

4.1.2 Interviews / focus group

The results obtained with the questionnaire were complemented with interviews / focus group with entities / organisms concerned or dealing with financial literacy. The number of interviews / focus group varied among partner countries. Nevertheless, at least 7 persons were interviewed or participated in the focus group (by country). These persons were experts in finances, digital education or were elements of the end user target of the project.

At the end, with the results got from the questionnaire, plus those obtained in the focus group, we were able to do the gap analysis for Europe (partner countries), concerning Financial Literacy, which can be seen in table 6.

Table 6 – Financial literacy gap analysis

STRENGHTS WEAKNESSES

Increase of citizens awareness about the need to become financially literate

ONLINE approach: allowing for an

increased reach of individuals, lower production costs than traditional courses and free of charge

Training and information will be provided using popular channels, i.e. apps, QR

codes, social networks, etc. The learning approach is attractive, but

also simple and practical A modular training system with small

units will help learners keep on track

Different audience profiles

Lack of target group financial planning and savings habits, which are not

incorporated or promoted in early stages of education

Need to clarify translation issues of training materials during the development of IO2

Values and ethics: (key players oriented

in order not to feel responsible for the lack of information of the public) and lack of transparency plus conflict of interests

The figure of financial educator is not

present in the project

OPPORTUNITIES THREATS

Young adult population does not seem to be aware of their need to develop personal financial management skills

Negative perceptions from the population about financial institutions

Easy access to Internet

Young adult people promptness to digital environments and technologies

Young adult population have easy access to mobiles smartphones and computers

Global increased awareness about financial sustainability among young

adult population, as a result of social and economic crisis

Online training as convenient option to fit personal and professional life of the

target group and may be adjusted to different audience profiles

Global economic and social crisis

Lack of lifelong learning habits

Lack of experience and trust in distance learning

Low level of digital literacy

Cultural issues: People lack of interest, motivation and habits concerning the search for financial information/strategies/training

Financial companies’ aggressive marketing

Tendency to contract personal credit on regular basis

5 ONLINE CURRICULUM AND MODULES

As already said, we identified 8 modules that will support the online course: Basic math; Budgeting; Savings; Indebtedness; Credit and Loans; Consumer rights; Investment and entrepreneurship; Digital Literacy and access to financial education. Taking into consideration the results from the state of the art and gap analysis, we started the development of the online curriculum. We were aware that the preferred course features, were: Navigation, Easy use of mobile devices and text easy to read.

Furthermore, according to the focus group the consortium needed:

To think of the possibility of making up an app that offers, for each financial decision,

information in real time to the consumer according to where s/he is located via QR or

Smartphone GPS codes.

It should be a very simple tool (i.e. through a mobile apps), very interactive, user friendly

accessible from multiple channels, with tutoring, motivation techniques and including short

training pills not to discourage engagement.

As for the teaching and learning methods, results show that the course needs to:

Use of inquiry-based and problem-based learning approaches;

Accommodate multiple learning styles and contextualise learning to meet the needs of

managers in different work contexts, including national, business sector, and organisational

differences;

Provide authentic learning opportunities. Present the content in modular “learning bites” that will

be able to provide just in time learning;

Promote self-reflection through the provision of tutor support and guidance, as well as keeping

online journals;

Preparation of learning activities to be carried out either synchronously or asynchronously;

Provision of stories and case studies as simple examples on financial situations in which people

can feel identified without exposing personal situation examples, promoting Peer to Peer

support and communication;

According to these suggestion the 8 module are being developed. The figure below show a screen

shot of one unit:

Figure 1: Screenshot of one unit

6 CONCLUSIONS

Financial Literacy has been identified as one of the priority issues in Europe. It is necessary to prepare young adults to face the challenges of a modern society, mainly one that is submerged into a financial crisis. After the struggling with indebtedness, society needs to look now to the young generation and to educate them to avoid past problems. Society has realized now that education is the key (at least one of the keys) to equip citizens with the necessary tools to face future challenges. eFinLit project addresses these challenges by providing for free the so necessary education. Modules will be developed and provided on an online platform for all those interested in improving their financial education skills. Each contribute is one step ahead towards the increased sense of citizenship.

7 REFERENCES

[1] OECD (2015). Financial Education. http://www.oecd.org/finance/financial-education/

[2] The Economist (Sep 10, 2011). The jobless young – Left behind.

http://www.economist.com/node/21528614

[3] Antolin, A.; Payet, S. (2011). Assessing the Labour, Financial and Demographic Risks to

Retirement Income from Defined-Contribution Pensions, OECD Journal: Financial Market Trends,

Vol 2010(2). http://www.oecd.org/finance/financial-markets/47522586.pdf