Global ‘Financial Literacy’ study – the results

Yesterday I showed a test that the US company S&P (who compile the S&P US stock market index) administered around the world in 2015 to try and establish the link between economic development and the ‘financial literacy’ of each country’s population.

The correct answers are in bold:

A. RISK DIVERSIFICATION Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments

1. one business or investment?
2. multiple businesses or investments?
3. don’t know
4. refused to answer

B. INFLATION 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

1.  less than you can buy today?
2. the same as you can buy today?
3. more than you can buy today?
4. don’t know
5. refused to answer

C. NUMERACY (INTEREST) Suppose you need to borrow 100 US dollars. Which is the lower amount to pay back:

1. 105 US dollars?
2. 100 US dollars plus three percent?
3. don’t know
4. refused to answer

D. COMPOUND INTEREST Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add more money to your account the second year than it did the first year, or will it add the same amount of money both years?

1. more?
2. the same?
3. don’t know
4. refused to answer

E. COMPOUND INTEREST Suppose you had 100 US dollars in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account?

1. more than 150 dollars?
2. exactly 150 dollars?
3. less than 150 dollars?
4. don’t know
5. refused to answer

The results:

A person only had to get a shockingly low three answers right to be considered ‘financially literate’

Canada, Germany, UK, US, Netherlands, Scandinavia – around 65% of people got three or more answers right

France – only 50% of those taking the test got three or more answers right

Spain, Italy, Portugal and Greece – yup, you guessed it – less than 40% of those questioned got three or more right answers

And perhaps surprisingly, given their ability to make money, less than 30% of Indians and Chinese got three or more right answers.

If anyone wants to read the full results of the study, they’re at http://gflec.org/wp-content/uploads/2015/11/Finlit_paper_16_F2_singles.pdf

Or else, for a shorter version, here’s a one and a half minute YouTube video summarising the results: