As if we needed another piece of evidence, a new study (OECD/INFE International Survey of Adult Financial Literacy Competencies is the official name) out from the OECD tells us what many of us already know. Most consumers around the world are NOT financially literate. The US chose not to participate for some reason, so I was left without the easy headline of “We’re number 1 (NOT), I mean number 14, when it comes to financial literacy.”

I have a simple request to the research world. Please, please, please stop with these surveys showing a lack of financial literacy. We know already…financial literacy around the world sucks! I don’t need another study to confirm that!

What would I love to see more of? How about research on scalable interventions that work OR Visits to classrooms to find out how teachers are imparting knowledge AND changing behaviors of students OR Highlighting curricula that are not teaching students how to do better on multiple-choice tests but rather how to make better decisions using a logical approach (case studies anyone?) OR demonstrating how math teachers build numeracy with their students using personal finance concepts.  We need to shift the debate away from the problem and hone in on solutions! NGPF looks forward to providing research grants in the future to tackle these and other issues. Reach out to me if you are interested in talking further!

Ok, I better at least admit that I read the report’s executive summary. The survey measured knowledge, behavior and attitudes Here were the highlights from each area:

• Knowledge
  • “On average, just 56% of adults across participating countries and economies achieved a score of at least five out of seven (considered to be the minimum target score), compared with an average of 63% across OECD countries, indicating that many adults around the world are currently unable to reach the minimum target score on financial knowledge.”
  • Three areas that respondents struggled most with were compound interest, calculating interest rates (numeracy) and diversification: “Some areas of financial knowledge appear to be more problematic. Only 42% of adults across all participating countries and economies are aware of the additional benefits of interest compounding on savings (48% across OECD countries), and only 58% could compute a percentage to calculate a simple interest on savings (65% across the OECD). Only about two in three adults – across OECD and all participating countries and economies – were aware that it is possible to reduce investment risk by buying a range of different stocks.
  • Weak numeracy skills clearly a contributing factor to low levels of financial literacy: “Low levels of numeracy may be further reducing the ability of individuals to make sound decisions by applying financial knowledge. Responses to a question asking people to calculate the balance of an account after 2% interest has been added, suggest that a sizable proportion of the population of many countries finds it difficult to apply. This finding suggests that financial educators should take into account the level of numeracy of their target audience when developing financial education resources.”
    • We are looking at ways to incorporate more math into our resources, with NGPF Data Crunches being the best example of this.

• Behavior
  • Budgeting is a real weakness: “The weakest areas of financial behaviour across these measures appear to be related to budgeting, planning ahead, choosing products and using independent advice. On average, across participating countries and economies, only 60% of adults reported having a household budget.”
    • Our most popular activity is this Salary-Based Budgeting Project

• Attitudes
  • Consumers don’t seek independent information or advice: Interestingly, relatively few people are choosing new financial products with the aid of independent information or advice – including best buy tables – indicating that more could be done to guide consumers towards unbiased sources of information.
    • Many of NGPF activities teach students how to do this critical research function and seek out good sources of information:
      • Research and Select A Checking Account
      • Research and Select A Health Insurance Plan

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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