WHAT IS FINANCIAL LITERACY?
In a very broad sense, financial literacy is having the financial knowledge and skills to better understand your financial situation and how that can be impacted (in both a positive and a negative way) by all the financial choices and decisions (big or small) that you make.
WHAT ARE THE BENEFITS OF FINANCIAL LITERACY?
There are many benefits for taking the time to educate yourself on financial issues.
The greatest benefit is that financially literate people are better prepared for the future. If covid-19 pandemic has taught us anything, it’s that we never know what can happen to us and even wealthy people can suddenly be faced with a financial crisis. However, if you’re prepared, the probability that you and your family can withstand a temporary financial roadblock is much greater. Moreover, financially literate people are also less vulnerable to fraud since they have a better understanding of their finances and devote more time to research available data prior to making financial decisions.
Therefore, financial literacy is essential as well-informed investors are able to make better financial decisions, reducing the risk of losing their money or property and minimizes the chances of leading to a large loss of capital and/or creating debt, which is certain circumstances can lead to bankruptcy.
THE ROLE OF THE CYPRUS SECURITIES AND EXCHANGE COMMISSION
The Cyprus Securities and Exchange Commission (CySEC) is the independent public supervisory Authority responsible for the supervision of the investment services market in Cyprus. You may read more about CySEC here.
Having adopted the promotion of financial literacy and investor education among its key strategic objectives, CySEC undertakes various initiatives in this area. One of them is the creation of a dedicated website space on Financial Education with the aim to offer a gateway for investors to obtain reliable and impartial financial information on matters that are related to investments and the investment services market, as well as other areas under CySEC regulation and supervision.
For further information please visit the Financial Education section on CySEC’s webpage.
WHY DO WE NEED A NATIONAL STRATEGY FOR FINANCIAL LITERACY?
Although from time-to-time numerous important initiatives and actions with the aim to promote financial literacy were undertaken unilaterally by various Authorities, associations and other bodies in Cyprus, including CySEC, these had limited effectiveness and impact since they were not coordinated and did not cover the entire range of the financial sector but rather addressed a small segment of the population.
According to the Organisation for Economic Co-operation and Development (OECD), the most effective way to improve long term levels of financial literacy in a country is through the implementation of a collective, coordinated and targeted National Strategy for Financial Literacy.
A well-designed National Strategy can promote the issue in a more methodical and targeted way, establish a permanent mechanism for coordination and cooperation among all stakeholders involved -public, private, and non-profit organizations to maximize their influence, broaden the scope and impact of all initiatives undertaken, encourage synergies and teamwork, and ensure the concentration and most efficient use of available resources, financial and human.
In the international environment in which financial markets operate nowadays, financial education is an imperative need. The emergence of new and complex financial products and services, the rapid pace at which the capital markets move, as well as their rapid development and intense volatility, may multiply opportunities, but it also multiplies potential risks for the investors. In addition, the financial needs of the investors themselves have become more complex, making it necessary and imperative for them to be educated on proper financial management.
Numerous advantages will result from a collective and coordinated approach of the issue. The implementation of a National Strategy with common goals and priorities will strengthen the effort to tackle financial illiteracy and increase the number of citizens who will benefit.The National Strategy includes awareness campaigns, as well as tools to assist investors to make well-informed financial decisions. An Action Plan and data analysis will be used to measure and analyse the level of financial literacy among various population groups (young people, pensioners, women, children, people with various levels of education, etc.). Then the country will be able to follow a plan to reduce financial illiteracy by educating and informing each target group and taking coordinated and planned actions to spread and promote the key messages to all the citizens.
Taking everything into consideration, it is obvious that to effectively address financial literacy in Cyprus, it should unquestionably be implemented under the umbrella of a National Strategy.
THE ROAD TOWARDS THE ESTABLISHMENT OF A NATIONAL STRATEGY
In December 2020, following a recommendation by the Parliamentary Education Committee of the Parliament, an Ad-Hoc Committee was established with the intend to formulate and propose a National Strategy for the promotion of Financial Literacy and Financial Education in Cyprus. The Ad-Hoc Committee consisted of executive representatives from the Central Bank (which led and coordinated its work), the Ministry of Finance, the Ministry of Education, Culture, Sports and Youth, the Cyprus Securities and Exchange Commission, and two experts from the University of Cyprus and the Cyprus University of Technology. External scientific professionals with a vast experience and expertise in matters of financial education and the promotion of financial literacy abroad also contributed to the work of the Ad-Hoc Committee.
On the 29th of July 2022, the National Strategy for the promotion of Financial Literacy was approved by the Council of Ministers in the form of the proposal which was prepared by the Ad-Hoc Committee and submitted by the Ministry of Finance and the Ministry of Education, Culture, Sport and Youth.
The adoption of the National Strategy is an important development for all the citizens of Cyprus, as it is expected to strengthen the financial literacy levels of the citizens, and consequently their protection.
The implementation of the National Strategy will be undertaken by a new independent statutory Body, the Cyprus Financial Literacy and Education Committee (CY-FLEC).
CySEC is committed to work alongside other bodies and authorities for the implementation of the National Strategy and at the same time urges other stakeholders to take initiatives for the promotion of financial literacy, eager to corporate with them in joint actions.
Read more about the report of the National Strategy for the promotion of Financial Literacy and Education in Cyprus here.
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