The FINANCIAL — Two-thirds of adults worldwide are financially illiterate, with sizable gaps between men’s and women’s financial literacy.
These data are from Standard & Poor’s Ratings Services Global Financial Literacy Survey of more than 150,000 adults in 148 countries in 2014. Adults were tested on their knowledge of four basic financial concepts: risk diversification, inflation, numeracy and compound interest. Respondents were considered financially literate if they were able to correctly answer questions about three of the four concepts.
Data were collected via the Gallup World Poll, and researchers from the World Bank Development Research Group and the Global Financial Literacy Excellence Center at George Washington University conducted the analysis. The findings represent the world’s largest, most comprehensive global measurement of financial literacy to date.
Scandinavian countries have the highest financial literacy rates globally, with Norway, Denmark and Sweden at 71% each. Israel (68%), Canada (68%), the United Kingdom (67%), the Netherlands (66%) and Germany (66%) are also among the most financially literate countries in the world.
Yemen (13%), Albania (14%) and Afghanistan (14%) are the least financially literate populations worldwide, with one in seven or fewer residents financially literate.
Among the world’s largest economies with democratic systems of government, also known as the G7, Italy had the lowest financial literacy rate (37%), while Canadians were the most literate (68%).
Globally, there is a five-percentage-point gender gap in financial literacy: 35% of men are financially literate, compared with 30% of women. Gender gaps are present in most countries, even in highly developed ones. The gender gap is pronounced in the U.S., for example, where men’s financial literacy is 10 points higher than American women’s. In addition to these divides, the U.S. also suffers from large financial literacy gaps by income and education.
Fifty-seven percent of U.S. adults overall are financially literate, with the U.S. ranking 14th in the world in financial literacy. U.S. adults have a relatively weak understanding of compound interest, the survey found. Even among those who have a credit card or who finance their homes, one-third of respondents could not correctly answer the compound interest questions.
Bottom Line
Standard & Poor’s Ratings Services Global Financial Literacy Survey offers an unprecedented, comprehensive assessment of worldwide financial literacy. This study quantifies financial literacy in more than 99% of the world’s adult population, and across geographic and demographic groups. The full report can be found here.
There is a great range of financial literacy worldwide. Even in regions where the most residents are financially literate, there are still sizable financially illiterate populations — of roughly three in 10 people in several Scandinavian countries, for example.
But while literacy rates may vary from country to country, the disparity between men and women is common worldwide, existing in highly developed and less developed countries alike.
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