Abstract:

This paper focuses on the development of teaching effective methods to be implemented at university level. Specifically, we describe best practices deployed within an undergraduate course on Financial Mathematics using authentic financial examples and real day to day context, with the aim of improving engagement and inspiring students. In Financial Mathematics, students are expected to learn how to take effective financial decisions about money in a world epitomized by growing financial complexity. Financial knowledge gained will be applied in the future in the personal sphere but can also be applied in their professional careers, if they select employment requiring them to analyse investment costs and returns on investments for their companies. To teach and learn complex contents the use of realistic and practical material serves to empower and promote its more frequent use, increasing financial literacy.

This academic course 2022-23 has been very special because the financial context in which the mathematical problems of the course were embedded has changed in two meaningful ways. First, after an era of ultra-low interest rates, that even conducted to negative interest rates in sovereign debt, Central Banks started to raise interest rates to fight inflation. The quick tightening of the financial conditions breathed new life into the time value money concept. This shift in the economic scenario provided a vibrant context of financial news and the emergence of a plethora of financial products adapted to the new market conditions, from which the course benefited.

Second, the EU has continued deploying its plan of financing sustainable growth passing new rules in financial markets, which incorporate the idea of sustainability in financial advice. In Spain as of August 2022, retail investors are asked about their ESG preferences and offered products matching such preferences. This second regulatory aspect is aligned with the teaching perspective used, given that it also includes ethical and social dimensions in future personal and corporate decisions.

Therefore, the paper reviews the literature on financial literacy education and the use of “real life” context. Then, it describes the teaching methodology and the distribution of the time of the class in two main blocks. First, a directed discussion on a recently published news or an open-ended question (a financial dilemma) that could be related to the contents of the course. Second, an interactive lecture, where the teacher presents material and answer student questions that arise. It includes breaks where students face multiple choice questions and real financial products and problems, such as the interest paid to finance the acquisition of a car. The paper offers a sample of these problems. Finally, it describes the results obtained by two groups (94 students) that took the financial course this year. The results show a greater connection between students and realistic context problems.

Keywords:

Financial Mathematics, real context, teaching methodologies, financial literacy.