A major survey on financial literacy has just been published, and the results are absolutely terrible.
Between them, McGraw Hill Financial (which owns S&P), the World Bank and Gallup have produced the S&P Global Financial Literacy Survey, which attempted to get an idea of how financial literate the world is by polling 150,000 adults in more than 140 countries.
They have defined financial literacy as the ability to answer three of four really simple questions about inflation, risk and interest. Take a look.
One of the easiest questions on the test is about interest. There’s no compounding involved, and the numbers themselves aren’t at all complicated. Here it is:
“Suppose you need to borrow 100 (country currency). Which is the lower amount to pay back: 105 (country currency) or 100 (country currency) plus 3%?”
So it’s a bit terrifying that only 49% of the people polled around the world could answer that question. The country results range hugely. In Yemen, just 16% of people answered the question correctly, in comparison to 79% in Turkmenistan.
Even once the poorest parts of the world are excluded from the test and only OECD member rich countries are included, the proportion getting the answer right only rises to 59%.
Only a third of the total number surveyed could get three out of four of the questions correct giving the world as a whole a financial literacy rating of just 33%. Again, when that’s only using the OECD countries, it rises to 53%, but it’s still pretty depressing.
Here’s how the global variation looks:
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