Financial dunces

Education and training can save lives. In 1911, a fire started onstage during the final act of an opera at the Edinburgh Festival Theatre in Scotland. The audience rushed to the doors, causing instant mayhem within the theater. The band suddenly began playing the national anthem. The audience came to its senses and walked in a safe and orderly way out of the theater.

Fires were commonplace in British theaters in the 19th century, as lighting entirely depended on candles. For a century from 1797, 1,100 establishments went up in smoke. The worst recorded fire was at the Theatre Royal in Exeter in 1887 that left 188 dead and more injured. The calamity occurred because the audience fought to get out at the same time. Since then, London strengthened fire regulations and required wider exits. Audiences were repeatedly told that evacuation in an orderly fashion could save lives. If the English people had not been told that lesson so often, they would not have paid heed to the message of their national anthem in 1911.

Finances should work in the same way. Learning should lead to the protection of properties. It elevates the ability to detect scams and risks. Voice phishing scams, which first surfaced 10 years ago, have cost Korean people 616.6 billion won ($522.2 million). The baits schemers use to steal personal and financial information and money are diverse, from claims of lottery wins to ransom threats. The callers have become bold enough to impersonate not just bank staff, but also officials from the financial supervisory authority. It is not just retired seniors that fall for the scams, but also young educated office workers. This is because we have not had enough formal financial education. Various surveys suggest Koreans are more or less illiterate in financial affairs. The people in Myanmar and Mongolia are smarter than us in terms of financial knowledge. We are behind Thailand, China and Vietnam, according to a global survey on financial literacy by MasterCard in 2014.

The Financial Supervisory Service didn’t believe that survey and conducted a poll on its own. It asked people to answer yes or no to the question of whether it helps your credit rating when one does not use a credit card. More than 60 percent said yes, it did. It’s no surprise schemers around the world think Koreans are easy prey. Financial education through 12 years of schooling takes up less than 10 hours. The course will be squeezed down further next year due to an increase in the number of history lessons.

Even retiring Samsung executives don’t know how to open a bank account on their own. Those who subscribed to two types of variable life insurance policies - although there is no double coverage - total 1.6 million. Most people do not know where to place their severance pay. They look up newspapers or ask acquaintances for advice. They are lucky if they know someone who knows a little about investment. But most aren’t lucky in that way, so they either lose their money in some poor investment or put it away in bank accounts that generate scant returns. Aging feels more insecure and scarier.

The situation is different in advanced countries. The United Kingdom and countries in the European Union are eager to educate their population on financing. They believe social security will improve if people know more about how money works. British schools teach finance as a regular course. The Dutch government designates one full week in March as “Money Week” and has 4,000 lecturers go around elementary schools across the nation to teach finance. In October, there is a pension week to lecture thousands of workers on how to get by without a regular job.

Financial education is a kind of safety education. It is the same as teaching someone how to evacuate a ship during a disaster. The wisdom of surviving rainy days through smart money management can shape one’s life. One must learn not to be tempted to chase high returns or take the advice of questionable strangers. Safe money management can secure a comfortable old age.

Smart money management habits from a young age can change the quality of life in old age. The younger and the more people learn about how to manage their income, the better. We must consider making financial education as compulsory as sexual harassment education in workplaces. There is no one to blame when one loses precious wealth. The nation has a duty to upgrade the financial literacy of its people.

JoongAng Ilbo, Dec. 10, Page 34

The author is an editorial writer of the JoongAng Ilbo.

by Yi Jung-jae