A recent report by the Organisation for Economic Co-operation and Development (OECD) has underscored a concerning deficiency in financial literacy among adults, revealing that only 34% possess the minimum level of financial acumen. The study encompassed 39 countries and emphasized the crucial role of effective money management in individual and societal well-being.
The report, in light of rising inflation and interest rates, emphasized the vulnerability of those lacking basic financial knowledge. Chiara Monticone, senior policy analyst at the OECD, emphasized the need for enhanced financial knowledge and skills to navigate challenging economic circumstances, including the use of digital financial services.
The OECD assigned financial literacy scores to the 39 countries studied, with Ireland and Germany emerging as the only nations reaching the minimum financial literacy threshold of 70 out of 100 points. The report highlighted variations between different population groups, indicating that individuals with higher formal education, higher incomes, and employment status tend to exhibit better money management skills. Gender and age were also contributing factors, with men and individuals between 30 and 59 years old generally demonstrating higher financial literacy levels.
Key findings of the report revealed that 84% of adults understand the definition of inflation, while only 63% can apply the concept of the ‘time value of money’ to their savings. The study indicated that 42% of adults comprehend compound interest. Additionally, the report addressed the issue of financial vulnerability, with 15% of respondents reporting falling victim to monetary fraud or scams, showcasing a negative correlation between financial knowledge and risk.
In the realm of digital financial literacy, the report revealed that only 29% of adults reached the target level for digital skills on average, though scores increased with higher education and income levels. Given the current economic pressures, the OECD advocates for enhanced financial education to bolster resilience, emphasizing the importance of educating individuals on digital means of managing money, particularly those with lower skill levels. The report noted that only 59% of adults studied could cover a major expense equivalent to one month of income without seeking external support, such as loans from banks, family, or friends.
