Financial education includes the knowledge and skills needed to rationally manage our income, our assets, but also our liabilities. According to Andrea Milidoni, an associate professor of finance at the University of Cyprus, financial education “is important for everyone, for a very simple reason: money is a tool developed to facilitate human trade for thousands of years and it is important to we know how to use it with the least possible mistakes “. Such mistakes, the academic continued, “may have an impact on our future well-being, but also on the well-being of our dependents.” In an interview with “P”, Dr. Milidonis also stated that in order to use money with the least possible mistakes, we need to understand basic concepts that affect our pockets, such as interest rates, inflation, consumption, savings, lending, risk diversification and investment “. Andreas Milidonis is also a member of the Ad-Hoc Committee for the development of a National Strategy for the promotion of Financial Literacy and Financial Education in Cyprus.
At what age do we start making the first financial transactions / transactions?
Maybe from the age of 6-7, when children start using the elementary school canteen.
What is the right age to start studying finance?
In Ontario, Canada, financial education starts in the first grade of elementary school. In the UK it also starts in elementary school. The same is true in other developed countries of the world. The global trend for financial education is intensifying in High School and Lyceum in many countries.
Quality of life
What does one who has no financial education, who is financially illiterate lose?
I would say that someone who makes a lot of mistakes using money as a result of financial illiteracy is deducting from his future quality of life, especially if that person has limited resources. Let me explain what I mean by an example: suppose a person receiving the average salary in Cyprus commits 50% of his or her monthly income to his or her mortgage installment for the next 25 years. Through financial education, we are informed that the percentage of our salary that may be committed to repay installments of all loans (eg limit account, credit card, car loan and mortgage) should not exceed approximately one third of our salary. Exceeding this limit, this person limits other opportunities in which he could use his money such as consumption and savings.
Why should the debate on the minimum wage – which is currently in the news – include financial education?
For the benefit of personal or family, financial planning. In other words: tidying up consumer habits increases the chances of saving, even a small amount, for unforeseen expenses. Once the so-called personal financial safety cushion is slowly built, then savings can help us plan further training that will improve our future salary (ie investing in education). We can also think of further savings that will help us maintain our quality of life as much as possible in the retirement years. In short, financial education helps us to reduce some of the common mistakes we make in Cyprus: overconsumption and especially over-indebtedness, which is usually associated with mortgages beyond our means.
Safety cushion
What is the value of the savings?
Saving is achieved by reducing the consumption of our income. Our savings ensure the safety cushion for unforeseen expenses. In addition, it helps us to raise the down payment for the purchase of a car or our roof, a down payment that is a prerequisite for securing a loan. Usually, the higher the down payment, the lower the interest rate charged by the banks. Finally, saving through a retirement product allows us to view our retirement with more optimism. All of the above applies to a greater extent to the younger generation, who are expected to have a longer life expectancy and lower retirement benefits than current retirees.
Borrowing Cost
What is the basic knowledge that a citizen should know about borrowing?
Borrowing is the mortgage of our future income for their immediate use. In other words, using a credit card today or using a “limit” account to buy a product that is “in vogue” but we do not really need it, we commit part of our future salary to buy it today. Simply put, before we use any form of lending, it would be good to ask ourselves: “Do I need this product or do I want it?”. Another important aspect of borrowing is the cost of borrowing. Studies abroad show that ignorance of how interest rates work leads to wrong decisions, especially when it comes to lending. For example, the concept of interest can bring significant benefits to a depositor or investor, but also significant costs to a borrower, which are often underestimated. This means that consumers underestimate the value of saving, as they mistakenly believe that saving a few euros each month will not make a difference. The same is true to a greater extent with lending (lending rates are usually higher than deposits), as people underestimate the cost of borrowing and borrow more easily than they should.
Syntax – Incentives
Does the average worker in our country know about retirement, what pension will he receive and what should he do so that his standard of living does not fall during his retirement?
My impression is that there are shortcomings. Many countries around the world provide tax breaks for savings purposes for retirement purposes, as people usually do not plan so far without government incentives. Unfortunately in Cyprus, although similar incentives are provided, these do not apply to about 50% of the workforce, as they have an income lower than the tax-free income tax threshold.
Low level
Which groups of the population in Cyprus have the biggest problem of financial illiteracy?
Based on the latest sample survey on financial literacy in our country, conducted by the Central Bank of Cyprus, the level of financial literacy on the island is lower than many European countries. Specifically, the biggest problem within Cyprus is found in the younger generation (ages 18-29), women, people with little or no education, people with low income and people who have not had contact with courses related to economics, accounting and political economy.
National strategy
You are a member of the Ad-Hoc Committee for the formulation of a National Strategy for the promotion of financial education in Cyprus. Have you come up with a strategy as a Commission ?
Yes, I have the honor and privilege of representing the University of Cyprus in this Ad-Hoc Committee set up near the end of 2020. Meetings are held at least once a month. The Commission's work is based on the results of research on financial literacy and education conducted abroad, but of course in Cyprus as well. We also have contact with external scientific collaborators who enrich with their experiences from their own countries the formulation of our own strategy. As a committee we have reached the National Strategy for the Promotion of Financial Literacy and Financial Education in Cyprus. In the coming weeks, the Commission 's substantiated proposals, based on the above – mentioned inquiries, will be announced and forwarded to the executive. We hope that the Council of Ministers will adopt our suggestions so that we can improve financial literacy and education in Cyprus.
Do schools in Cyprus today prepare tomorrow's citizens at all about finances? The universities;
Prior to the creation of the Ad-Hoc Committee and specifically in September 2020, the Department of Accounting and Finance of the University of Cyprus started a compulsory course in Financial Education for its students. At the same time, it offered a similar elective course to all the other students of the University of Cyprus. I am pleased to announce that the sections of the chosen course are overcrowded from September 2020 until today. As far as I know, a similar course is offered at the Cyprus University of Technology from 2021, while similar courses are offered by some private universities. Regarding secondary education in Cyprus, the first financial education course started in September 2021 at the Senior School. Specifically, after their own wish and together with the support of the Association of Financial Analysts of Cyprus (CFA Society Cyprus), they approached us towards the end of 2020 for the creation and introduction of such a course in their curriculum. After productive meetings that lasted about 6 months, we decided to offer a compulsory course to the seniors of the school. The logic of the compulsory course has to do with the low levels of financial literacy recorded by the latest Central Bank survey among people who have no contact with branches related to finance and accounting. The structure and material of the course was designed and offered free of charge by the University of Cyprus. Following this initiative, in October 2021, again in collaboration with the CFA Society Cyprus, we began to contact the other private schools in Cyprus to continue the promotion of financial education in schools. The response of the private schools speaks for itself: to date, ten other private schools, from three different cities, representing more than 40% of the students of the private schools of Cyprus, with teaching in both Greek and English, have been committed to introduce financial education in their program from September 2022. We also have scheduled meetings and discussions with at least two other major schools in the coming days, while invitations have been sent and continue to be sent to other schools. You can follow all the developments on twitter through the hashtag #financial_education. I am optimistic that a similar initiative will soon follow in public schools.
Do EU member states have a finance class in schools?
Yes, there are Member States that have introduced financial education in schools. Also, at least 25 US states have legislated within 2021 on the need to introduce financial education in High Schools. As you can see, the trend in favor of financial education is not Cypriot, but more general. In addition, many other countries have either recently announced or will soon announce their national financial education strategy.
