“We are not reaching those who have the greatest financial literacy deficits”

Miguel Ferreira, Vice Dean for Faculty and Research at Nova SBE, has dedicated much of his attention to financial literacy, creating a program to improve adults' skills in this area. He has now received a prestigious European grant to scale this model, which will reach SMEs and the entire country. The Finance for All program has reached nearly 6,000 people, but the ambition now is to reach 50,000 with the help of European Union funding.

The professor and project leader is optimistic about the future progress of financial literacy among the Portuguese, especially since younger generations are more informed and will benefit from the mandatory introduction of this content into school curricula. It remains to reach older people, especially since there is a segment of the population that has become more vulnerable with the digitalization of many services.

In this conversation, Miguel Ferreira discusses the path we still have to take as a country, the essential areas, and the role of universities in connecting with communities and society in general.

First things first: what are we talking about when we talk about financial literacy?

When we talk about financial literacy , we mean people having basic financial knowledge and the confidence to make sound decisions, whether regarding family budgeting, savings, financial investments, or credit decisions. We also mean managing over-indebtedness, avoiding financial fraud—a very important issue today—and using digital payment methods . It's a set of topics that are important to master so that informed people have the confidence to make sound decisions and improve their financial well-being.

We're almost talking about a basic toolkit. But that's not what you teach your students, who presumably already have greater sophistication and need more elaborate tools. Here, we're talking about the basic need that everyone, as citizens—regardless of profession or academic level—must have, right?

Yes, this type of knowledge is important for everyone. And one challenge in Portuguese society is that average levels of financial literacy are low in the European context. Even in the European Union, levels are low, on average : the most recent studies indicate that only one in two people has basic financial knowledge. And when I say basic, I mean understanding inflation, calculating and capitalizing interest, or the importance of diversifying investments. In Portugal, results fall below this average: around 40% of citizens have this knowledge. We're not talking about anything sophisticated—these are fundamental concepts for financial well-being.

The problem is that there's a lack of knowledge even when it comes to the simplest things. For example, reading a contract or a credit document. Even there, there's still a lot to do, right?

Yes. And, if we go further back, the root of the problem is even deeper. An OECD study came out this week showing that around 50% of Portuguese people can only understand relatively short texts. There's a general lack of literacy—a lack of education—that goes back a long way. It's been improving in recent years: looking at those under 35, the picture is very different; we're close to European educational attainment levels . But, looking at the accumulated difficulties in the education system, there's a lack of general literacy and mathematical literacy—and this has implications for financial literacy, beyond the specific topics in this area.

This OECD data placed us, in one of the indicators, as the second worst country, after Chile, right?

Yes. And the OECD isn't even the best comparison group because it includes many developing countries. In the most recent Eurobarometer, we ranked second worst within the European Union in basic financial literacy.

How did you begin addressing these issues? Why did you decide to pay so much attention to them and dedicate yourself to this cause?

For two reasons. First, because I began to see studies showing this to be a serious problem in Portugal. I'm a Finance professor and teach these topics to young students in the undergraduate program at Nova SBE. Among Economics students, the level of knowledge is better—we have courses on these topics—but the finding was clear: the country's average performance was poor. Then came the opportunity to partner with Fidelidade, which, out of social responsibility, approached us to create a free financial literacy program—"Finanças para Todos"—open to anyone over 18. We focused on adults because there are already many initiatives for young people, and to make the leap, we couldn't wait decades: it was important to address the gaps in the adult population. We then created a program of approximately 10 hours, open to anyone interested, covering the various topics of financial literacy.

Are older people more vulnerable today, with the sophistication of payment methods and services?

They are, due to several trends. The digitalization of banking services makes it difficult to access personalized advice—branches have closed, and relationships are more distant, often digital. It's increasingly crucial for people to take charge of their financial management and plan for retirement. It's expected that, in the next 20–30 years, the so-called replacement rate will drop to less than 50%—currently, it's close to 70%. The replacement rate is the pension's final salary; in Portugal, it's still relatively high, but it's expected to fall to less than 50% in 25–30 years. It's crucial to start planning for retirement, saving, and investing toward that goal. This individual responsibility makes financial knowledge even more important.

And we have an additional problem: we save more than we invest, and often in non-returnable products. Wealth is highly concentrated in illiquid assets—like housing—that we need when we retire.

Yes. For many families, the largest portion of their wealth is their home. This poses challenges because it's a low-liquid investment: it's not easy to convert it into cash in retirement, when we need liquidity—and we still need a home . Unfortunately, the Portuguese market lacks banking products that allow you to convert housing into cash during retirement.

It is possible that it will appear.

I think so. I've heard that some banks are considering launching this type of product, which will become increasingly important.

On "Finanças para Todos," the latest information I read is that they reached over 6,000 people. Is that right?

Yes. We've held three annual sessions and trained around 6,000 people. Demand is very high: we receive around 10,000 applicants each year and can only accept around 2,500. We're now starting our fourth session, again with around 2,500 participants. It's encouraging to see that people attend all five sessions and that, based on our impact assessment, their financial knowledge and behaviors improve compared to their starting point.

It must be an interesting experience to engage with this reality. As a teacher, you deal with many students; but in this slightly older age group, there will be very diverse experiences that come to the program.

Since it's an adult audience, the average age is around 40—we have participants ranging from 18 to 65. On average, it's a young audience, but they already have life experience and real-life situations that they bring to the room. This enriches the experience for everyone: they learn from each other, and for those providing the training, this sharing is invaluable—it's an added value of the program.

With funding from the European Commission, the goal is to bring literacy programs across the country—including inland regions—to workers in SMEs, where we find lower literacy levels and lower income and education levels.

You recently received a prestigious grant—the ERC Advanced Grant from the European Research Council. Essentially, to launch or "add on" the "Finance for All" project. It builds on "Finance for All," scales what already exists, and is it something new?

It's based on the current program. One thing we've observed is that those seeking the program already have, on average, relatively high literacy levels for the Portuguese reality—70% have a college degree. They feel the need, but they start from an above-average base. In terms of literacy, they are at the level of the best European countries—the Scandinavians. Even so, we see a positive impact on knowledge. But there's a gap: we're not reaching those with the greatest deficits. That's where the effect could be most significant. Therefore, we launched the project to reach people through small and medium-sized enterprises . With funding from the European Commission, the goal is to bring literacy programs throughout the country—including inland regions—to workers in SMEs, where we find lower literacy levels and lower income and education levels. We believe the program can have an even more significant effect on financial well-being.

This is also wealth for the country: more financially stable people create wealth for everyone.

Yes, and there are studies that show that countries with better levels of financial literacy are more economically developed.

There is also an indirect effect: with more knowledge, we better understand the State Budget, political decisions, and resource allocation—and we can be more demanding.

Exactly. They better understand the European Central Bank's political decisions and communications, which have a direct impact on people's lives. When the ECB changes interest rates, it almost directly affects mortgage payments and household budgets.

How many people do you expect to reach? What's the deadline? And how will it work—won't Miguel be traveling from place to place with a suitcase on his back, giving training…

The project will last five years and will involve a large team of managers and trainers traveling across the country. The goal is to train 48,000 people in five years, involving approximately 6,500 companies. We will conduct an impact assessment: verify whether knowledge improves and financial decisions are made better—budgeting, savings, investments, credit—, whether over-indebtedness is less likely, and whether they can save more. And we will measure the impact on companies: with less financial stress, people are more productive; and some of the knowledge learned can be useful at work. With this, we hope to promote business development in each municipality where the program is offered.

And even better understand management decisions—or make suggestions—because those with more knowledge feel more confident doing so. This also enriches.

Yes, it's an interesting effect: with better literacy levels, workers better understand management decisions. This contributes to a more motivated and engaged workforce and facilitates retention , as they better understand the company's decisions.

How will the impact measurement be done?

In two ways. First, with a group that receives training and a control group that doesn't receive it immediately—only two years later. During those two years, we compare the groups. Second, we follow up with people after the training, for at least two years, to see if they retain their knowledge and make better decisions compared to their baseline. We'll conduct questionnaires before and after the training, and throughout those two years.

This topic isn't new or niche. Shouldn't we collectively do more? What can we do, as a society, to tackle this on a larger scale?

It has to start with young people, with schools. A very important decision was made: to include financial literacy as a mandatory subject in the Citizenship and Development course. Previously, it wasn't mandatory and often wasn't taught . With the curriculum review, it's now included in all grades, from 1st to 12th. It's a fundamental step toward achieving better levels in the future—it's been shown that we need to start early. The earlier we start, the better the levels will be when young people reach adulthood.

The concepts are instilled and then built upon.

Exactly. Indirectly, it can improve parents' financial literacy: young people take home what they've learned and talk about it, generating a positive spillover effect.

In this interaction with society — universities open to the community to tackle concrete problems — do we have this school and this spirit in Portugal?

In the past—and still today—there was little interaction, but it has improved. We see more initiatives, more joint projects between companies and universities, and also between citizens and universities. "Finance for All" is a good example: it has a direct impact on people's lives. But it needs to reach everyone. Impact assessment allows us to determine whether the program works and achieves its objectives, and thus informs public policies to extend the program, with government support, to even more people.

In essence: "We've studied it, we've been on the ground, we have data—it's proven. Take the model and scale it up."

Exactly. It's an effective solution, with relatively low costs compared to alternatives. It works—take it and expand it. This is where support from the government will be important, as well as from other civil society entities, foundations, etc.

Is the problem not the universities' will, but the lack of means to do more than just teach?

We wouldn't have had the program we've had for the past three years without the insurance company's support. It requires staff and trainers—and it's costly. And we wouldn't have reached 48,000 people without the European Commission's research grant.

Going back to the beginning: do you believe we can get closer to the best in the coming years?

Yes. I think that in 10 years, the landscape will be different. On the one hand, there are many initiatives with young people, now culminating in mandatory content in schools—it will have a significant impact, and in 10–15 years, we will begin to see it. On the other hand, our program contributes to the adult population . And I hope that this large-scale project with SME workers can then be expanded to even more people, with support from the government and civil society, so that we can continue on this path and surpass where we are today.