(Thesis Reading) FinLit Global survey (Risk diversification is the concept…
(Thesis Reading) FinLit Global survey
1) There are big difference in Financial Literacy level within EU
The average European adult who are considered as FL are 52%
But, high FL North West EU and other region
Denmark, Germany, Netherland, Sweden (65%) vs Romania 22%
FL rate differs greatly between major and emerging eco
Average of major eco (Canada, France, Italy, Japan, UK, US) =55% (Highest 68% Canada, Lowest 37% Italy)
Average of BRICS: 28% (India 24% to South Africa 42%)
Income explain difference in FL but only to some extent
At upper half of income spectrum, FL rate tend to be higher in countries with higher GDP per capital level.
In countries with GDP per capital < $12K, no evidence proving income is associated with FL
The authors speculate that, in those country, national-scale policies (i.e education, consumer protection policy) impact FL more than any other factor.
Risk diversification is the concept differentiate FL level the most
About half of global adult understand concept of inflation and interest
The percentage of adult correctly respond to Risk diversification is only 35%.
Also differentiate between major economies (64% understand) vs emerging economies (28%)
Financial concept tend to be better understood in countries with related past experience
Ex: Argentina, Bosnia struggled with hyperinflation in 80s-90s; majority of population there now understand the concept of inflation correctly (even though the overall result are not high)
Men tend to out-perform women
(35% men vs 30% women globally)
Women are more likely to choose "don't know" answer
this gender gap appear in both major and emerging eco
Elders are the group with lowest FL
group of retire age (65+) underperform other groups in both M&E eco
In Major economies, FL level tend to have hump shape (increase until age 50, then reduce)
In Emerging eco, younger generation (15-35) is the one who outperform others)
Strong correlation between FL and educational level
Globally, Gap between primary, secondary, and tertiary education can result in a difference of 15% point.
Many users of financial products lack fundamental financial skills.
Globally, 35% of account owner are FL, according to the study
in major eco, 57% of account owners
in emerging eco, 30% of account owner
Financial skill is even weaker among adults who dont have an account.
People currently using more advance financial services (credit card, mortgage loan) tend to edge out in FL. But a considerable amount of them still find difficult when answering finance-related question.
Ex: according to the study, in Japan, about 20% of adult have outstanding mortgage or housing loan. But among those people, only over one-third correctly answer compound interest question.