The Future of Education

Edition 13

Accepted Abstracts

Improving Financial Literacy at School: a Way to Ensure Retirement Well-being

Feliciana Rajevska, Institute of Social, Economic and Humanities Research of Vidzeme University of Applied Sciences (Latvia)

Didzis Stavausis, Institute of Social, Economic and Humanities Research of Vidzeme University of Applied Sciences (Latvia)


Latvia was among the first countries to introduce notional defined contribution (NDC) multi-pillar pension scheme in the mid 90-ties. In this scheme responsibility to ensure sufficient replacement income rate for retirement has shifted away from state to individual. However education of every individual and his/her enlightened participation in the social security system is the only way towards a knowledge-based welfare state. Effective use of the state funded pension scheme to the greatest extent depends on the individual decisions, choosing or changing pension manager or investment policy. 

Many scholars have outlined that satisfactory results can only be achieved if financial literacy skills are being improved at school, because pupils have not developed particular behavioural patterns when dealing with various financial issues which are then difficult to change. Furthermore, only at this point it is possible to reach out to almost every member of the society, which is near to impossible in later life stages. Last but not least, this is an efficient way how to influence adult members of the society, because students tend to exchange the information and skills gained at school with their parents and closest relatives.

In 2014 first financial literacy promotion strategy was issued in which the need of a well-informed society has been explicitly outlined. It has been emphasized that Latvia’s main competitive advantage in the global knowledge-based society is skilled and well-educated workforce. Therefore a particular attention should be devoted towards promotion of financial literacy (among other skills) at school.

Although Latvian pupils score slightly above the average result of all OECD countries when it comes to financial literacy (501, compared to 500 in OECD countries), Latvia has less students who have very good or excellent financial literacy skills (15%, compared to 21% in OECD countries). Also the nationwide financial literacy index confirmed that young people (18-24 years) show the lowest knowledge level, especially with regards of pensions. The curriculum is overloaded, leaving little flexibility for teachers to introduce students with personal finance planning. Economics is a voluntary subject, hence only 40% of pupils learn any basics of economics. As a result young people are low-skilled and ignorant towards their pension savings, which results in an inability to use the stimulating mechanisms of the scheme to raise their retirement well-being. All these factors cause great uncertainty in the future, because 82% of people will completely rely on their pension during the retirement, at the same time 75% are not sure that they will receive sufficient retirement income. A possible alternative solution would be implementation of life-cycle investment strategy as a default pension plan to safeguard people from unexpected financial turbulences and ensure that those with low financial literacy skills would multiply their savings effectively.

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