Financial Education, Savings and Investments
Report

Financial Education, Savings and Investments

OECD Working Papers on Finance, Insurance and Private Pensions No. 22

Sue Lewis and Flore-Anne Messy
OECD, 2012
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Editorial Rating

7

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  • Applicable

Recommendation

Consumers all over the world resist saving money. Economists Sue Lewis of the UK Treasury and Flore-Anne Messy of the Organisation for Economic Co-operation and Development, delve into why people won’t save and what governments can do to change this habit. By digging into surveys and literature, the authors learned how the 2008 financial crisis affected consumers, why some people are more motivated to save and why most people aren’t saving enough. The authors examine changes in financial products and show how technology is both an impediment to and an enabler of savings. This paper is accessible enough for anyone who wants to understand the public’s financial behavior – so some conclusions may seem obvious to financial insiders – but nonetheless, it is technically developed and in-depth enough to satisfy the cognoscenti. getAbstract recommends this insightful overview to economists, policymakers and those whose work demands that they be sensitive to consumer behavior.

Summary

Savers Versus Spenders

People who save money fare better in economic downturns and after a job loss and are equipped to handle unplanned costs instead of relying on credit to make ends meet. Those who save are more likely to work for themselves and to take advantage of educational opportunities. Savers benefit their economies because savings provide banks with money to loan and invest.

People can chose among a variety of vehicles for saving money, such as traditional savings accounts, “complex investments” and investments in real estate. Some ways to save are better for short-term goals and “income smoothing” – bridging occasional gaps in expenses and income – while others are better for meeting long-term goals, such as retirement. People who don’t save tend to use credit to smooth income gaps or meet unexpected costs. Since the financial crisis, credit is more difficult to obtain, so those who rely on it in a pinch may face difficulties.

In the wake of the 2008 financial crisis, “savings and investment products” have grown more complex, more opaque and more difficult to deploy. These products transfer greater risk and responsibility to confused and frustrated...

About the Authors

Sue Lewis is head of savings and investments in the UK Treasury and Flore-Anne Messy is an administrator in the OECD’s Directorate for Financial and Enterprise.

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