Global Financial Literacy Study: Two-Thirds of Adults Worldwide Are Not Financially Literate
The global financial education community is buzzing over the findings from a recent worldwide Standard & Poor’s survey conducted by Gallup, the World Bank and GFLEC. In one of the most comprehensive measurements of global financial capability to date, the Global Financial Literacy Survey found that two-thirds of adults are not financially literate, while there also is a very significant gap between women and men in their financial capability in both developed and developing countries.
The results of the survey were derived from interviews held with over 150,000 adults roughly 140 countries and the testing was focused on their understanding of four primary financial themes: inflation, risk diversification, numeracy and interest compounding. Gallup then collected the data as part of the Gallup World Poll and researchers analyzed the information at the World Bank and at George Washington University’s Global Financial Literacy Excellence Center (GFLEC).
Among the many findings of the survey are the following:
<> In virtually all countries there exists a material gap between men and women in terms of their financial literacy. Globally, there is a five-point gender gap, with 35 percent of men being financially literate compared with 30 percent of women. In the U.S., men’s financial literacy averages 10 percentage points higher than women’s. Notably, in China and South Africa, there was no gender gap.
<> Within the G7 group of countries (Canada, France, Germany, United Kingdom, Italy, Japan, and the United States), financial literacy varies enormously, from a low of 37 percent in Italy to a high of 68 percent in Canada.
<> In the U.S., about 60 percent of adults have a credit card. According to the survey findings, more than a third of these adults have relatively low financial literacy, and 34 percent could not answer the question on compound interest correctly.
<> 30 percent of Americans who finance their homes through bank financing could not answer the question on compound interest correctly.
<> 61 percent of adults in China do not save for old age. About 72 percent of those non-savers have low financial literacy, according to the survey findings.
<> About 47 percent of adults in India (415 million adults) lack a bank account. Roughly 80 percent of those without bank accounts have weak financial literacy.
<> There is wide variation in financial literacy rates across economies in Sub-Saharan Africa. At 15 percent, Angola and Somalia are among the countries with the world's lowest financial literacy rates. At 52 percent, Botswana's rate is the region's highest and comparable with the average of high-income OECD economies.
While many industry experts have speculated that financial literacy and capability are weak across both developed and developing nations, this survey is one of the most all-inclusive research efforts on a global scale to date that establishes with greater definitiveness the state of financial literacy across the globe.
The big question now for financial literacy professionals is what efforts can be undertaken to boost financial capability going forward.
Additional details about the survey and its findings can be found here.