Did you know that April is Financial Literacy Month in the U.S? That’s appropriate because Forbes reports a disturbing worldwide financial literacy study indicating only 57% of U.S. inhabitants know much about finance.
America may be the home of the brave, but it’s number 14 in financial literacy compared to more money savvy people in Israel, the U.K., Finland, Canada and Australia.
According to the first-ever S&P Global FinLit Survey, a detailed and comprehensive analysis of worldwide financial literacy by the World Bank, Gallup, and George Washington University, just one-third of the world’s population is financially literate. On a country-by-country basis, Norway, Denmark and Sweden tied for first place, with 71% of their populations ranking as financially literate. At the bottom of the spectrum was Yemen — just 13% of the Yemeni population was deemed financially literate by the S&P survey.”
When we think about financial literacy, especially as it impacts financial inclusion, many believe the two are associated with India, other Asian countries,and the African continent.
However, most people everywhere can’t calculate basic interest or understand how credit works. It’s especially true among the poor and women who don’t have access to banking or other financial services.
Worldwide Financial Literacy Video
Yet most of the five questions didn’t involve math or deep thinking–just a basic understanding of the questions.
Here’s an example:
Suppose over the next 10 years the prices of the things you buy double. If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today or more than you can buy today?
- the same
- don’t know
- refuse to answer
To answer the question, a person needs to know what “prices” and “income” mean, that “doubles” is another word for a 100% increase, and the meaning of “buy.” And it’s a multiple choice question.
As Forbes points out, only 33% of the 150,000 participants in the study passed it, an estimated 3.5 BILLION people, mainly in developing countries, are financially illiterate.
Using Financial Products and Services Makes a Difference
The FinLit study found a relationship between using financial services and understanding financial concepts unrelated to income status.
Poor and rich people who had experience with savings accounts, for instance, better-understood finances than those who didn’t. That’s what makes financial inclusion growth so insidious. Access to financial systems–whether via mobile money or a bank–exposes users to monetary transactions, savings, and credit concepts.
Download the complete study in PDF format here.
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