[Reporter’s Notebook] Financial Education Must Be Done Properly

A consumer who had a lump sum of money went to a bank. He wanted to earn more interest than from a deposit. He was told by a teller that it was a "product that offers higher returns than deposits while being safe." The subscription process was simple. He just had to sign where circled on the document and record himself saying, "I want to subscribe to this product." After one year of subscribing to the product, he received a text message from the bank saying that it had been Knock-In (principal loss).

The damage caused by the Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) equity-linked securities (ELS) earlier this year mostly occurred in this way. Who is more at fault? The employee who did not explain properly and the bank that pushed sales using performance indicators (KPI) are to blame. However, the consumer is also at fault for not properly researching. This is not the first case of mis-selling. There was the overseas interest rate-linked derivative-linked fund (DLF) financial accident in 2019. Financial authorities introduced measures to prevent recurrence, such as establishing recording procedures and banning sales inducement through KPIs. The results were, as everyone knows, similar.

Strengthening product sales regulations and blocking bank sales will not solve the problem. If customers had the principle of not subscribing unless they fully understood the product, based on experience through financial education, it could have been prevented. This is why financial education is urgently needed.

When I started investigating with interest, nationwide financial education was difficult. Then, appropriate education should be provided when necessary. According to a survey conducted by the Financial Supervisory Service, most financial consumers could not properly calculate compound interest and invested without understanding product characteristics. Timely and practical education that can truly help consumers is urgently needed. Basic knowledge should be provided when minimum knowledge is required, such as when taking out a loan for the first time.

Children growing up must receive proper financial education. It is not enough to simply add "Finance and Economic Life" as an elective subject in the high school curriculum. It should be taught from elementary school. The Ministry of Education needs to take the lead in creating tailored curricula by grade level. Interdepartmental barriers must also be overcome. Since various entities such as the Financial Services Commission, Bank of Korea, and Ministry of Economy and Finance are involved, a control tower for financial education is necessary instead of each conducting their own education. The Financial Services Commission, which oversees financial policy, should go beyond just managing the regular meetings (twice a year) stipulated in the Financial Consumer Protection Act and continuously develop policies.

One scene kept coming to mind during the investigation. It was children playing a financial education board game, Blue Marble, during regular elementary school classes. Watching them build assets with their own strategies made me think, "What if I had received this kind of education?" "There is a difference between children who have fun learning about finance and those who do not," said a teacher who taught the children. If we learn about finance enjoyably from a young age, wouldn’t we be able to live making the right choices?