While the U.S. is the world’s richest country, the financial literacy of its residents seems to leave a lot to be desired, especially when compared to some other developed countries. In a recent global poll on financial literacy, it came in 14th, lagging behind New Zealand, the Czech Republic, and Singapore.
The survey, conducted by Standard & Poor’s Ratings Services in cooperation with the World Bank, Gallup World Poll, and GWU’s Global Financial Literacy Excellence Center, polled 150,000 individuals from 148 countries. This is the first time that data comparing financial literacy globally has been collected and made available.
Researchers determined financial literacy and the general capability of adults to make good financial decisions through four basic personal finance areas. Participants were asked about inflation, compounding, interest, and financial diversification. Those who were able to provide answers to at least three of these topics were considered financially literate.
In the U.S., 57% of polled individuals were able to answer enough questions to rank as financially literate. In comparison, most Scandinavian countries scored over 70%, followed by Israel, Canada and six additional countries that scored well above 60%.
The questions used in the survey avoided going into specific products such as credit cards or mortgages, but instead focused on universal financial principles. One of the surprising results of the survey was low financial literacy in some of the most developed countries in the world. While U.S.’s 57% is considered relatively weak, Japan ranked significantly lower with 38%, while Italy only managed 37 percent.
The data also showed that there is a gender gap in financial literacy in most countries, as 35% of men and 30% of women managed to pass globally. Another peculiarity showed that while in developed countries the middle-aged showed better financial literacy than younger individuals, in developing countries that trend is reversed.
While the direct link between a country’s economy and financial literacy has not yet been established, if it turns out to exist, some wealthy countries with low literacy will have to find a way to effect a change in this area sooner rather than later.