Elena Karkoti on why tackling financial illiteracy is a high priority for CySEC

“Given the importance of finance in modern society, tackling this challenge is a high priority for CySEC,” Elena Karkoti, Officer A at CySEC’s Department of Strategy, International Relations and Communications notes.

Speaking to CBN, the Officer in charge of the financial education of the public at the Cyprus Securities and Exchange Commission, among other things, points out that people often do not see the immediate benefits of basic financial education and prioritise other areas of learning.

“We have been playing an active role in the formulation of a new National Strategy for Promoting Financial Literacy and Financial Education in Cyprus and will continue to do so in its forthcoming implementation,” she goes on to underline.

CySEC is working to improve financial literacy in Cyprus. What initially brought this problem to CySEC’s attention and what do you believe has prevented wider financial literacy before now?

Financial knowledge in the EU is, on average, low, and in Cyprus, our own analysis as well as that of other bodies has identified significant levels of financial illiteracy. Surveys on a global scale consistently highlight low levels of financial literacy.

One significant obstacle to financial literacy is the lack of motivation or interest in learning important financial skills and concepts. People often do not see the immediate benefits of basic financial education and prioritise other areas of learning. On top of this, financial concepts can be complex and intimidating for many people, especially those with limited prior exposure or education in finance. The complexity of the terminology that is sometimes used and abstract concepts may act as a barrier to understanding.

Particularly now, amid this period of global upheaval, these inequalities have deepened, and most of us are preoccupied with immediate concerns such as education, work, family and the general cost of living, and this can leave little time or the mental bandwidth to learn about the key aspects of financial literacy.

In the past, although there have been several stakeholders involved, efforts to promote financial literacy have not always been delivered in a collaborative way. Without cohesive and coordinated efforts among regulators, educational institutions, government agencies and private organisations, the overall effectiveness and reach can be compromised.

What are some of the ways CySEC is working to overcome these obstacles and improve financial literacy? (For example, school visits, marketing campaigns, collaborations with other institutions etc.)

Given the importance of finance in modern society, tackling this challenge is a high priority for CySEC and we have adopted a multifaceted approach to enhance financial literacy.

We strongly believe that financial education should start at an early stage and form part of the national core curriculum in schools. For this reason, CySEC has emphasised the need for the integration of an independent financial education course into the core education system, one that is available to all children.

We have been playing an active role in the formulation of a new National Strategy for Promoting Financial Literacy and Financial Education in Cyprus and will continue to do so in its forthcoming implementation. This is an important initiative that has benefitted from the co-ordination, pooling of resources and sharing of knowledge among regulators, educational institutions, government bodies and other stakeholders. Alongside this, CySEC is moving forward with its own educational program and continues to be involved in other initiatives with other stakeholders. For example, this year, we developed financial educational material for all secondary schools in collaboration with the Central Bank of Cyprus, the Ministry of Finance and the Ministry of Education, Sport and Youth, to ensure comprehensive coverage.

A number of surveys have suggested that young people are a growing force in the investment market and there is a rising appetite for riskier products, so CySEC has developed a number of tools and resources on our website for young people and adults. These resources include a Financial Education Hub that allows people to test their money skills in a Knowledge Quiz, as well as a series of Investor Guides, such as a guide to protect investors from fraud and a Guide to Sustainable Investments. Our aim throughout has been to turn complex financial concepts into easily understandable language and enhance overall financial education, since the lack of it has repeatedly proven to be very damaging to an individual’s long-term financial wellbeing.

CySEC also participates in global campaigns, such as the recent Global Money Week campaign, to raise awareness about the importance of financial education acquired early in life. This year, as part of our commitment to foster financial literacy among children, teenagers and students, CySEC organised a series of school and university lectures. These lectures aimed to cultivate a culture of financial awareness and provide an interactive and engaging learning experience, tailored to different age groups.

With a rising number of online investments, a high priority has been to developing specific materials for X (formerly Twitter), LinkedIn, Facebook, and Instagram, some of the platforms of choice among young people, to disseminate key messages as a way to reinforce our commitment to the promotion of financial education.

Every year, we also make student awards that incentivise students to explore topics aligned with CySEC's responsibilities and sector supervision and promote understanding among students.

CySEC participates with its own speakers in a plethora of events, seminars, and conferences dedicated to promoting financial literacy and education in Cyprus, furthering its outreach and impact. Appearances on television, radio shows and media publications also help us promote awareness on a larger scale.

What do you consider to be the main dangers people should look out for to avoid losing their money? And, are there specific measures they can take to better protect themselves? Are some groups of the population more vulnerable, for example children/teenagers or the elderly?

As a result of online investments and the widespread use of social media platforms, a fully digitalised investing environment has been created that provides easy and more efficient access to a variety of information.

Although online investing and social media has, in some ways, provided easier and more efficient access to investment and brought benefits in terms of financial market inclusion, unfortunately, financial risks and fraud has increased.

Individuals should always be wary of investment schemes that pop up during their daily digital interactions promising unrealistic returns or guaranteed profits. These informal recommendations are usually scams and can lead to significant financial losses.

Engaging in high-risk investments without fully understanding the associated risks can also result in substantial losses. It's essential to conduct thorough research to evaluate the credibility of an investment firm or individual and seek professional advice before investing. Understanding basic financial concepts, investment principles and recognising risks is crucial.

CySEC, like most regulators, has a section on its website that lists all the firms in Cyprus that are regulated and are therefore closely supervised by us.

When investing, investors should look to diversify their investments because of market volatility. Diversification can help mitigate losses and preserve wealth over the long term.

Individuals must be alert to social media promotions, high-pressure sales tactics and promises of high returns. Sadly, young people and the elderly are often more vulnerable to scammers and are frequently targeted by unscrupulous individuals.

This is why educating children and teenagers about basic financial concepts, responsible spending, saving habits and how long-term investment works can help mitigate the risks. Lifelong learning and providing information and resources to older adults on how to recognise and avoid financial exploitation is also crucial for protecting their financial well-being.

Overall, raising awareness, promoting financial literacy, and implementing proactive measures can help individuals of all ages to better protect themselves from financial dangers and avoid significant losses.

What role does technology play in both endangering the public? Can the proper use of technology also protect people from being scammed?

The pervasive use of technology has created a digital landscape where misinformation spreads rapidly, leading to financial harm for unsuspecting individuals. The vast use of smartphones, social media advertisement and financial influencers (“finfluencers”) that are able to reach a broad audience have significantly contributed to Investment risks.

The absence of a culture of managing money, and certain financial behaviours and attitudes, exacerbate the vulnerability of the public to scams that are increasingly growing in sophistication. Combined with low levels of financial knowledge and skills, this creates a fertile ground for exploitation.

At the same time, technology can provide unparalleled access to educational resources, promote financial inclusion and allow individuals to enhance their financial literacy and skills through online learning platforms, tutorials, and interactive tools.

By leveraging technology for learning, individuals can empower themselves with the knowledge needed to identify and avoid fraudulent schemes.

There is some exciting work going on in this area, and collaborative efforts between regulatory authorities, financial institutions and other stakeholders are paving the way towards the development of new tools and initiatives that protect the financial wellbeing of the public and prevent individuals from falling victim to financial fraud. Ultimately, this collaboration can only foster a more secure and informed financial environment for all.

CySEC’s strategic goal is to empower future generations with the necessary knowledge, attitude and skills to effectively manage their finances and to make informed financial decisions in the future, while enhancing the general public’s ability to safeguard themselves from the potential risks associated with financial investments.