We can’t even beat our friendly neighbors to the north. If you’ve ever wondered why we’re so bad at saving, it probably has something to do with our level of financial literacy (or rather, illiteracy). The United States ranks fourteenth, behind such countries as Canada (No. 5) and Finland (No. 10).
Globally, the “Standard & Poor’s Ratings Services Global Financial Literacy” finds that two-thirds of adults worldwide are not financially literate and there is a wide gap between men and women’s literacy, including in highly developed countries.
The survey shows that in almost every country there is a material gap between men and women. Worldwide, 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.
The S&P survey also found that Americans with less education and lower incomes are less financially literate than their counterparts in other developed, wealthy countries. U.S. adults have a relatively weak understanding of compound interest, the survey found, even though (or maybe because) Americans’ credit card use is among the highest in the world.
Additional findings from the survey include:
- Within the G7 group (Canada, France, Germany, United Kingdom, Italy, Japan, and the United States) of countries, 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.
“With technology spreading the design of innovative banking services and payment methods, it’s critical that we understand who knows what around the world,” Leora Klapper, lead economist of the World Bank Development Research Group, said in a statement. “My hope is that this data will help policymakers in finding ways to boost financial literacy and consumer protection and help open the door to greater financial inclusion and economic empowerment.
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
Where are the quiz questions? Don’t tell me that I probably suck at something without the opportunity to prove you wrong!