A Global Snapshot of Financial Illiteracy

By Right About Money Staff Report

November 17, 2016

Financial literacy throughout the world is low, numerous reports have found. Few people can perform even basic financial calculations or understand simple investment concepts, according to a survey last month from the Organization for Economic Cooperation and Development.

The OECD collected data from adults ages 18 to 79 in 30 countries, measuring financial knowledge, behaviors and attitudes. Barely 40% knew that a $100 savings account earning 2% a year would grow to more than $110 in five years. Only 60% had a budget, 44% comparison shopped for financial products and only half had any financial goals.

France, Finland and Norway rated highest among developed countries. Some other findings:

The level of financial literacy varies widely across countries. But on average, just 56% of respondents could correctly answer five of seven basic questions, considered a minimum measurement of financial literacy.

Some areas of financial knowledge appear to be most problematic. For example, only 42% of adults understand compound growth and only 58% can calculate simple interest on savings. Just two in three know it is possible to reduce investment risk by buying a range of different stocks.

In Russia, Thailand, Malaysia and the British Virgin Islands, no more than half of respondents understood diversification.

Even in the highest scoring countries, at least one in five could not calculate the balance of an account after 2% interest had been added. And in nearly all countries fewer than half could correctly identify the impact of compound growth over time.

 

Posted in International, Latest Research on November, 2016