Articles & Tools

Give tools – and close gaps

Author: Matan Koplevich
In honor of Money Week, we compared financial education between Israel and other countries around the world.

Financial literacy is now considered an essential personal skill that also contributes to socioeconomic resilience. Many countries invest significant resources in this issue, but Israel is lagging behind and finding it difficult to meet the goals it has set for itself. The vacuum created is being filled by private initiatives of entities and NGOs.

When the average Israeli teenager finishes high school, he usually knows how to calculate trigonometric identities, distinguish between a slight emphasis on reinforcement, and recite the anti-Diaspora message of the story “The Mistress and the Peddler.” But wouldn’t it be better to equip the novice citizen with knowledge about proper financial conduct?

Financial literacy, according to the Glossary of the Central Bureau of Statistics, is “the ability to read, analyze, understand and discuss economic-financial factors that affect an individual’s economic well-being. It includes the ability to evaluate economic possibilities, use money correctly, plan for the future, act accordingly in the present, and respond intelligently to economic changes.” In other words, without financial literacy, the average citizen will find it difficult to manage a resource that in modern society is perhaps the third most important after air and water – money.

Financial literacy allows for greater well-being and many researchers point out that it is especially essential for low-income earners. Since, in general, disadvantaged populations are far from accumulating assets, basic concepts such as savings, credit, investment, and utility are perceived as meaningless to them. Therefore, it is precisely the strengthening of financial literacy among these populations that increases the chances of breaking out of the cycle of poverty.

Despite all this, and despite the fact that the public discourse in Israel recognizes the need for financial literacy, there is currently no binding curriculum on the subject for schools, no organized national policy has been formulated, and there is no government entity clearly responsible for this. Already in 2005, as part of the Behar reform dealing with the Israeli capital market, it was decided to establish a government fund for financial education, which was finally established only in 2011 and has not been allocated the necessary resources to this day.

From time to time, specific attempts are made, such as the Ministry of Education’s authority program for 100 tenth grades to instill financial literacy, or the joint digital venture of ORT Israel and Bank Hapoalim, which offers a website that combines lesson plans in financial education and teacher training. In the absence of significant government attention, the vacuum is being filled by private initiatives by financial institutions and non-profit organizations such as Paamonim.

The best proof of Israel’s undignified place is the test of results. In 2012, PISA tests were administered to examine the degree of financial literacy among high school students in Israel, compared to other countries. On these tests, Israel finished with a score below the OECD average for the general population, and with a score equal to the average for the Jewish population only. The PISA tests are held every three years, and in 2015 and 2018 Israel refrained from participating in the PISA tests in the financial literacy section, but since then no significant progress has been made.

And what’s going on in the world?

In recent years, countries and international organizations have recognized the importance of financial education and are working to implement it among various populations. In 2008, an international forum (INFE) was established under the OECD to facilitate the sharing of knowledge and experience regarding financial education policy in various countries.

Some 60 countries have so far implemented financial education policies, of which 23 have implemented an initial pilot – including Israel, Canada and Hong Kong – and 11 have already implemented a second post-audit program. However, while the level of financial literacy in Israel was low, in Canada and Hong Kong there was a high level of financial literacy. In a 2020 INFE report, Hong Kong was ranked as having the highest level of financial literacy among the Forum’s member countries, and in the PISA tests in 2015 and 2018, Canada took second place.

As in Israel, Hong Kong and Canada do not require financial education in school curricula. However, in both of these countries there are organized and budgeted government bodies whose purpose is to promote the field. In 2012, Hong Kong established an official government body (IEC) with the sole purpose of improving financial literacy among citizens.

Canada took a slightly different approach. The financial education policy body is the Consumer Protection Agency (FCAC), but when Canadians decided to prioritize financial literacy, the FCAC was allocated adequate budgets and a dedicated supervisory committee with executive powers was established. The result is a variety of projects and initiatives that have made financial literacy accessible to all sectors of the population.

We can too

The successful case studies of Hong Kong and Canada, both of which do not have formal financial education requirements, may teach us about several aspects critical to the success of this policy.

First, we can conclude about the need for a central governmental body that outlines policy and is responsible for promoting it, raising resources, and synchronizing the activities of the various ministries.

In contrast to the position that sees the Ministry of Education as the main entity responsible for instilling financial literacy, it seems that the issue is perceived more broadly in successful countries. Therefore, it is possible that the burden of proof lies with a combination of several ministries headed by the Ministry of Finance, and not only with the Ministry of Education.

Since things don’t happen by themselves, there is a need to outline a clear policy with measurable goals and timetables. In Hong Kong and Canada, for example, long-term strategies and the means to implement them have been defined. In Israel, on the other hand, 6 years passed from the decision in the Behar Reform to the establishment of a pilot program on the subject, and another 6 years before very partial educational initiatives were initiated.

In the meantime, until the state decides to invest the necessary resources in this important issue, the responsibility for compensating for the “illiteracy tax” imposed on Israeli citizens in the absence of proper policy will probably remain in the hands of private organizations and NGOs.

The writer is the coordinator of the Jerusalem Student Branch at Paamonim and a student in the Pakam program at the Hebrew University

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