Enhancing people's financial literacy a priority

More attention should be paid to enhancing people's financial literacy, especially for the older age group, which requires consistent and targeted education through various channels, a survey has shown.

According to the 2023 China Residents Financial Literacy Report jointly released by the Shanghai Advanced Institute of Finance (SAIF) and Charles Schwab & Co Inc on Friday, the nation had an overall average financial literacy score of 68.7 out of 100, a slight increase compared with 64.4 points last year.

This report is based on a random sample of Internet questionnaires of more than10,000 effective samples, covering six dimensions to track people's financial literacy status, including saving, currency, consumer rights and obligations, financial planning and so on.

According to the result, Chinese residents showed the best understanding of financial planning, in which they scored highest; while in fields like currency and banking, saving and investing they are among the lowest.

"There's a growing interest of Chinese residents in financial products, as the demand for financial products is growing," said Thomas Pixley, general manager of Charles Schwab Shanghai.

"But what's the problem? Many are currently confused and don't know what to invest in."

He suggested that the education in terms of investment and wealth management should begin with the actual needs and behaviors of individuals. For example, to tackle the practical problems people faced instead of through racademic courses, which most people lack the time and energy to undertake.

Ti Gong

The report also found that there's a distinct discrepancy among the financial literacy of different age groups, with respondents under 18 and over 55 scoring the lowest.

Specifically speaking, the youngest group underperformed other groups concerning income, expenses, and credit, whereas the older group needs improvement in identifying credible sources of financial information and understanding their consumer rights and obligations.

Wu Fei, professor at the SAIF, emphasized the importance of starting financial education early and having a retirement account.

"There is a theory of external constraints," said Wu. "Each of us has the human nature to enjoy the moment. If you can't overcome that, it's pretty difficult for saving. But with an early pension account can act as an external constraint.

"Current investors lack planning awareness and have insufficient discerning judgment about pension products. Such a market status quo can only be changed by improving financial literacy in terms of popularity and education."

In November 2022, the country implemented a personal pension system, allowing people to invest in their private pension account with a cap of 12,000 yuan (US$1,654) annually.

Wu also believes that on the basis of promoting education, more participation of various financial activities should be actively encouraged.

"People will not have practical knowledge and understanding of certain financial products if they never try them, " said Wu.

Pixley added: "In the US, retirement is one of the main core efforts of our industry. Our investment education on retirement starts early, giving people a sense of long-term investment, which is very important."

By the end of 2023, China's population aged 60 years and above exceeded 296 million, with a large elderly population base and a rapid rate of aging, according to the latest data by the National Bureau of Statistics.

Ti Gong