MEASURING FINANCIAL LITERACY: RESULTS OF OECD/INFE SURVEY Empower Consumers of Financial Products and Services through Improving Financial Literacy/Capability and Effective Consumer Protection G20 Russia, OECD, World Bank June 2013, Moscow CHIARA MONTICONE – OECD with the support of the Russia/World Bank/OECD Trust Fund

Monograph collecting results on the 14 countries that undertook the initial OECD/INFE survey about: Financial literacy Analysis by gender and other socio-demographics Financial inclusion Results of the OECD/INFE survey

Simple division: most people can do it, basic maths is not a problem Simple interest + compounding: problematic for a relatively large proportion of respondents across all countries – In Albania and Peru, fewer than 1 in 5 people were able to apply their knowledge to this – In every country except Norway, at least half of the population failed to identify the impact of compounding Diversification is another key difficulty in many countries Financial knowledge

Eight knowledge questions – rescaled to – “high” knowledge with at least 3/4 of correct answers In AL, AR, NO, PE, ZA fewer than half of the respondents achieved a “high” score No country had more than 70% of their population who could answer at least 3/4 of the questions Percentage of respondents who gave at least ¾ correct answers to the financial knowledge questions

Shopping around for financial products is uncommon (UK most likely at just 16%) Setting long term goals and striving to achieve them is also quite uncommon in some countries (e.g. Albania 30%) Borrowing to make ends meet is not widespread, but still a problem for a large minority in certain countries. – 47% of Armenians had resorted to borrowing the last time their income fell short of their expenditure – in Albania, Peru and South Africa over a quarter of respondents had also done so Financial behaviour

Overall we looked for 9 positive behaviours (rescaled to 0-100) - relatively high score if exhibit 2/3 of the behaviours At least 30% of respondents in each country exhibit fewer than 6 of them

Three attitudinal statements – 54% of respondents in South Africa have attitudes that tend towards the longer term compared with just 10% in Armenia – 64% of Peruvians and 61% of Albanians found saving satisfying against only 8% in Armenia and 19% in Poland – About half of Albanians and Peruvians disagree that money is there to be spent, but only 2% of Armenians and 12% of Polish respondents Financial attitudes

Results by socio-demographics Women typically have lower levels of knowledge. Average overall scores in every country are either lower for women, or the same for both genders Higher income and higher education are associated with higher overall scores, as is middle age Average financial knowledge score by gender – Score based on 8 questions and rescaled on a scale

Financial literacy and inclusion The survey allows to study the correlation between financial literacy and financial inclusion: o product awareness o product holding o active choice For instance, knowing about interest compounding is associated to holding savings or investments Percentage of respondents who hold a savings/investment product by ability to answer the interest compounding question

Initial OECD/INFE survey instrument Albania, Armenia, British Virgin Islands, Czech Republic, Estonia, Germany, Hungary, Ireland, Malaysia, Norway, Peru, Poland, South Africa, United Kingdom Revised survey instrument Part/all questions to the national population: Iceland, Jamaica, Lithuania, New Zealand, Puerto Rico, Serbia, South Africa, South Korea, Turkey Part/all questions to sub- populations: Canada, India, United States Way forward: revised OECD/INFE questionnaire

THANK YOU! Questions and feedback welcome OECD INFE Russia/World Bank/OECD Financial Literacy and Education Trust Fund