Why financial education must begin at childhood
Risks identified online from finfluencers
The Cyprus Securities and Exchange Commission (CySEC) is participating in the international campaign Global Investor Week for its sixth year running, highlighting financial literacy and the protection of the public and investors. World Investor Week is an initiative of the International Organization of Securities Commissions (IOSCO), which is joined by supervisory authorities and other organisations from 115 countries.
This year, HCMC Regulator’s focus is on:
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The dangers lurking online and on social media from so-called “finfluencers”,
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The role of parents and carers in children's financial education.
CySEC has prepared two detailed informative guides on these topics, which are now live on its website.
The threat of finfluencers
The first topic tackles the risks arising from the action of financial influencers – or finfluencers. These are celebrities and people active in the field of social media who offer advice on spending, saving and investing. Many finfluencers gain a huge following without having the required professional qualifications or being licensed to provide financial advice. HCMC Regulator has identified specific cases where misleading information or inappropriate advice was given, and has found that a significant proportion of investors are being lured in by these promotions. A recent study by HCMC Regulator showed that 31% of respondents had made at least one investment based on advice from a finfluencer, while 26% admitted that they invested more money than they could afford to lose.
CySEC’s Guide specifies ways for investors to protect themselves from possible fraud. This includes advice to only invest in assets they fully understand and make sure they have thoroughly researched each investment by seeking information from different sources. They must always keep in mind that if something seems too good to be true, then it most likely is. Investors should be cautious of promises of fast and high returns, and to be suspicious if they are being pushed to take an investment decision in a hurry.
The first financial "lessons" come from parents
Childhood and adolescence are key when it comes to forming financial behaviours, with parents essentially providing the first "lessons" in money management. From an early age, parents' ultimate goal should be to instil a mind-set in their children that values responsible spending, financial planning for the future, and generosity. The first thing parents should keep in mind is that children learn a lot by observing. If parents demonstrate good financial habits, such as budgeting, adequate and regular saving, and responsible spending, children are much more likely to adopt these practices as well.
From there on, parents can explain to their children how money is earned and how it is allocated towards family expenses, such as food, instalments and bills, and entertainment, as well as how financial decisions are made. Children must learn the difference between needs and wants. Parents can refer to specific examples of daily essentials, such as food and clothes, compared with objects they may want but do not need, such as an additional toy. They can take their children to the supermarket and ask them to pick the best product combinations based on price.
The financial education of the public and investors is a strategic priority for HCMC Regulator and its initiatives are ongoing and cover a broad range of topics and audiences. The Commission maintains a Financial Education Hub on its website that contains a wealth of educational material, conducts its own awareness campaigns on current issues # and distributes warnings to the public when it identifies new risks. HCMC Regulator staff also give speeches and presentations at conferences and discussions, and the Commission participates in and organises events where it advocates for financial education.
* By Elena Karkoti: Officer A of the Cyprus Securities and Exchange Commission, responsible for Financial Education of the Public