"2% Annual Interest, If You Deposit 1 Million Won... Korean Seniors Unfamiliar with Economics [Song Seungseop's Financial Light]"

How was it? Easy or difficult? These three questions were created directly by the Bank of Korea and the Financial Supervisory Service in 2020 to assess the financial literacy of the public. Recently, the Ministry of Economy and Finance also released results from a survey on economic literacy. The results were dismal. The public’s economic literacy scored in the 50s. Compared to South Korea’s status as a top 10 global economic power, this is a poor report card. Especially, the economic literacy of the elderly was very low. Everyone knows that “earning money well” is important, but why is economic literacy necessary for earning money so low?

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From September to November last year, the Ministry of Economy and Finance surveyed 3,000 Korean citizens on economic literacy. Respondents ranged from 18-year-old youths to 79-year-old seniors, with an average score of 58.7 points. Although this was 2.4 points higher than in 2021, it was still a very low score below 60. People in their 20s and 30s scored relatively higher at 61.9 and 63.8 points respectively, but those in their 60s scored 53.6, and those in their 70s scored only 46.8 points.

Is it because few people are interested in economics? Not at all. When asked if they usually pay attention to economic issues, 40.1% answered “yes.” This was about twice as many as the 21.8% who said they were not interested in economics. However, the level of understanding was quite different. 33.1% of respondents said they “do not understand” economics well, which was twice as many as the 17.1% who said they “do understand.” This means that while many people are interested in economics, few actually understand it well.

The questions were not difficult either. In fact, the question about economic theory such as “supply and demand” had the highest correct answer rate at 79.2%. Rather, questions related to areas frequently encountered in daily life had lower correct answer rates. The question with the lowest score was about the “base interest rate.” This means that although the Bank of Korea has maintained an unusually high base interest rate, few people understood its impact properly. The correct answer rate for fixed deposits, which are easy to encounter in daily life, was also low at 37.1%. The same applied to labor contracts (43.1%), online transactions (48.8%), and taxes (49.3%).

Why does this happen? Experts point out that proper economic education is not provided from the regular school curriculum. Since classes are organized mainly for college entrance exams, economic education in elementary, middle, and high schools is not smooth. According to the Korea Institute for Curriculum and Evaluation, only 4,890 students chose economics in the 2024 College Scholastic Ability Test (CSAT), which is just 1.1% of all test takers. In 2007, it was 16%, but many students have avoided the subject because it is difficult and hard to score well.

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Lack of information is also a reason. Bang Woo-ri, head of the economic policy team at the Ministry of Economy and Finance, explains: “The main reason for not understanding economics well was identified as lack of information. Only about 4% of respondents had received economic education outside of school.” Especially for the elderly, who had the lowest economic literacy, TV remains the main source of economic knowledge. In other words, Koreans want to understand economics, but there is no platform to satisfy this need. This is why the government plans to create an economic education platform by June.

Unlike South Korea, major advanced countries have selected economic and financial education for their citizens as a key task and are actively promoting it. At a joint academic conference by the Korean Financial Consumer Association and the Korea Insurance Research Institute, the education status of the U.S. and the U.K. was introduced. The U.K. is overhauling its education system so that more than 2 million children and youths receive “meaningful financial education” by 2030, and policies are being promoted so that over 5 million people have sufficient economic knowledge. The Bank of England also creates school financial education content and even provides lesson plans. Adults can receive education and advice on debt, pensions, and more through the U.K.’s “Money Helper” system.

The U.S. has also established a national strategy through its education board to improve financial literacy. Since 2003, related laws have been enacted, and as of this year, 25 states including Alabama require “financial courses” as a graduation condition. Adults can use content from the U.S. Consumer Financial Protection Bureau (CFPB). Depending on their role as employers, teachers, or parents, they receive necessary education. The content guides practical topics such as how to buy a house, how to save emergency funds, how to manage student loans, and how to handle tax reporting.

Professor James Tobin, Yale University. Photo by Yale University.

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Of course, you might wonder why you need to understand economics well. James Tobin, an American economist who won the Nobel Prize in Economics, spoke about the importance of studying economics as follows:

“Everyone encounters numerous economic information in daily life. To discern the correct information among them, rational decision-making ability that critically evaluates the usefulness of information is necessary. Economic education provides that ability.”

Throughout life, we are always at crossroads making choices. We want to make wise decisions every time. Whether the living expenses you spend are appropriate, whether it is right to keep surplus funds in a savings account, whether it is good to start a cafe now, how much pension to contribute for retirement, or whether to subscribe to derivative products proposed by a bank clerk. Therefore, you should learn economics even now. When wise choices happen more often, we will live a more satisfying life.

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