The paradox of financial education in Europe

Europeans, investors worried about the future but conservative

In a socially and healthily uncertain world, an understanding of financial mechanisms is becoming a necessity to protect oneself from the vagaries of the future. Better financial education is essential.

According to a study by Uniopss and Vyv published in March 2022, only 43% of French people are confident about the future of social protection in terms of unemployment insurance, 31% in terms of prevention of loss of autonomy and 29% on retirement insurance. 

However, they continue to invest very conservatively, even in times of inflation. How can this be explained?

Less educated individuals invest more conservatively

According to an Allianz 2020 study, the main reason is lack of financial education. In their survey of 1000 people in 10 European states, the least educated people invest in more conservative products.

The OECD defines financial education as: “a combination of financial awareness, knowledge, skills, attitudes and behaviours necessary to make the right financial decisions and ultimately achieve individual financial well-being (…)”.

Financial education therefore involves not only financial knowledge, but also the ability to use it to make good financial decisions.

A lack of financial literacy among Europeans

According to an Allianz 2020 study, 30% of Europeans are able to answer basic financial questions about inflation, diversification and interest. This lack of financial education affects women even more, with a 16% gap with men on this subject. 

This is in line with a previous OECD study in 2012 which indicated that a significant proportion of individuals do not understand basic concepts such as diversification. 

A paradox: Europeans are more and more interested in finance… but less and less educated!

However, Europeans are interested in financial matters and want to learn more. According to a study by the Banque de France in 2020, 52% of French people say they are interested in financial news and topics.

An AMF report in 2021 indicates that the number of retail investors in France has doubled since 2019. The proportion of transactions carried out by individuals had reached 7% of total transactions by mid-2020 compared with 2% in 2019. This share has stabilised at 5% today.

This trend seems to be confirmed by the new generations. In a study conducted by Neuroprofiler in 2022 among European Generation X and Y investors, 70% said they were interested and ready to invest.

However, only 40% of them declare having followed a financial education. Moreover, the main reason for not investing for the 30% who say they do not wish to invest is precisely the lack of financial education.

How can we explain the paradox of a low level of financial literacy and yet the interest of individuals in the subject?

A first hypothesis may be the overconfidence bias of individuals, who overestimate their financial knowledge when they have little. This is supported by the 2012 OECD study, which shows that respondents overestimate their rate of correct answers and prefer to answer “wrong” rather than “I don’t know”.

Another factor would be the lack of financial training tools adapted to the expectations of individuals, especially the younger ones.

EDUprofiler, a fun investment education application

In response to this market need, Neuroprofiler has created an EDUprofiler, a fun financial education platform that allows investors of all ages and levels to become familiar with key investment concepts.

Created by French fintech Neuroprofiler, a specialist in cognitive science, gamification and finance, the platform offers a fluid and interactive experience to its users.

Via a fun and personalised dashboard, the user can choose to explore new financial concepts either through short infographics, text or training games that allow them to understand the mechanisms of the products by experimenting and having fun. Each puzzle and game is followed by a reward for success, and immediate corrective feedback for incorrect answers. 

The gamification of the course allows the user’s attention and interest to be constantly maintained. Each module corresponds to the discovery of a concept or a product. The user can understand the mechanisms in a few minutes. They are thus encouraged to train progressively and frequently on their mobile phone, in order to consolidate their knowledge.

EDUprofiler offers training modules for all levels, from the basics of investment (shares, bonds, funds, etc.) to more technical concepts (structured products, derivatives, etc.). 

In addition to democratising financial education, EDUprofiler also makes it possible to meet the MIFIDII regulatory requirements for assessing financial knowledge.