OECD/INFE tools for cross- country surveys of financial literacy Adele Atkinson, PhD Policy Analyst adele.atkinson@oecd.org www.financial-education.org With the support of the Russian/World Bank/OECD Trust Fund

Outline Questionnaire development the development process questionnaire content Data collection Final list of pilot countries Data analysis and results Some highlights: for more see the paper! Conclusions, outputs and future plans

Questionnaire development process Survey of INFE members: identify questions, survey approaches, analysis methods Develop, discuss, refine and pilot a questionnaire Analyse the pilot data, collect feedback from pilot countries Finalise the questionnaire and make available for widespread use Review of available national surveys to identify typical content, suitable questions & appropriate method for data collection and analysis Consultation with experts and country representatives to choose the most important questions and the best combination of questions Creation and fine-tuning of questionnaire Invitation to INFE members to pilot: accepted by 14 Creation of a master dataset and preliminary analysis in order to develop scoring Detailed analysis and reporting; finalising 2008/9 2010 2010/11 2011/12

Questionnaire content Behaviour 9 Q Keeping track of money Making ends meet Choosing and using products Short and long term planning Knowledge 8 Q Simple and compound interest Inflation- time value of money Risk and return Risk diversification Attitudes 4 Q Propensity to save vs spend Time preference (present vs future) Risk preference (explanatory variable) Financial inclusion Awareness of products Holding and using products Savings habits Socio-demographic information Age Gender Education Work Income Attitude example I find it more satisfying to spend money than to save it for the long term Money is there to be spent I tend to live for today and let tomorrow take care of itself I am prepared to risk some of my own money when saving or making and investment “A combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing”

Data collection A large-scale, robust data collection process Invite INFE members to pilot the questionnaire Countries translate, test and use questionnaire in large scale pilot OECD collect data from pilot countries and create a master dataset Review of available national surveys to identify typical content, suitable questions & appropriate method for data collection and analysis Consultation with experts and country representatives to choose the most important questions and the best combination of questions Creation and fine-tuning of questionnaire Invitation to INFE members to pilot: accepted by 14 Creation of a master dataset and preliminary analysis in order to develop scoring Detailed analysis and reporting; finalising 2009/10 2010/11 2011 2011

The pilot countries 14 countries drawn from 4 continents: Africa, Asia, Europe, South America Includes developed and emerging economies including middle (lower and upper), and high income economies Armenia, Albania, BVI, Czech Republic, Estonia, Germany, Hungary, Ireland, Malaysia, Norway, Peru, Poland, South Africa, UK

Ensuring comparable data Careful translation to retain the meaning of questions Target achieved sample of 1000+ individuals aged 18+ Weighted data to reflect gender/ age distribution Personal interviews (some online: Norway) Data collected by professional survey organisations in each country using a robust method to maximise comparability

Analysis of financial literacy scores Knowledge Maximum of 8 points (High score 6+) Behaviour Maximum of 9 points Attitudes Maximum of 5 points High score is >3 2 combined measures 1) Overall score Maximum 22 2) Number of high scores This is a wide-ranging questionnaire, designed to capture all of the main aspects of financial literacy Knowledge relevant to financial decisions Behaviour such as budgeting, saving and choosing financial products Attitudes to money and saving Socio-demographic information (age, gender, education, employment etc) Most questions are identical across countries but some have context flexibility e.g. product types The questionnaire includes several indicators of financial inclusion (results not presented here)

Financial knowledge At least 30% of respondents in each of the 14 countries scored less than 6 in the knowledge test (67% in RSA) Basic maths is not a problem: most respondents can do a simple division (79% RSA) However, there are basic levels of knowledge with serious weaknesses in every country Understanding the benefit of diversification and the impact of compound interest are the key difficulties (e.g. In RSA just 21% worked out interest after 1 year and then showed understanding of the benefit of compounding over 5 years)

Financial behaviours We looked for 9 positive behaviours. At least 30% of respondents in each country exhibit fewer than 6 of them. (in RSA 57% exhibited fewer than 6). 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%) The proportion actively saving ranges from below 30% in Hungary to 97% in Malaysia (RSA 53%)

Attitudes Combining results from 3 questions shows that 54% of respondents in RSA have attitudes that tend towards the longer term compared with just 11% in Armenia Very few people in Armenia (8%) and Poland (19%) find saving more satisfying than spending (RSA 48%) 60% of South Africans disagreed that they tend to live for today and let tomorrow take care of itself (Armenian results driven by people finding spending satisfying, and believing money is to be spent)

Relationship between behaviour and knowledge

Relationship between behaviour and attitude Financial attitude score

Variations by socio-demographics Women typically have lower levels of knowledge. In some countries (but not all) they have lower behaviour scores. In most countries women have more positive attitudes towards the long term Higher income and higher education are associated with higher overall scores, as is middle age

Conclusions of pilot The OECD/INFE have created a survey instrument that is highly flexible and applicable across a wide range of countries The simple, replicable measures of financial literacy allow analysis within and across countries and can be applied whenever the survey is used Country level data allows identification of gaps and needs; international data can identify good practices and international priorities (e.g. gender differences) The results are very interesting – some worrying findings, some findings that need further investigation, some interesting variations

Key outputs Framework for the Development of Financial Literacy Baseline Surveys: A First International Comparative Analysis, OECD Working Papers on Finance, Insurance and Private Pensions, No. 1, OECD Publishing. Measuring Financial Literacy: Results of the OECD / International Network on Financial Education (INFE) Pilot Study OECD Working Papers on Finance, Insurance and Private Pensions, No. 15, OECD Publishing. Questionnaire and Guidance Notes A questionnaire that includes guidance on how to undertake the survey and how to code the data for analysis. The whole of the questionnaire should be used to enable comparisons. It can be integrated into other surveys or used alone. A set of supplementary questions A collection of additional questions that may be of relevance to financial education policy in particular countries. Any number of questions from this set can be used.

Future plans Further data collection Many countries are using/have used the questions: e.g. Jamaica, Korea, Iceland, Thailand, Turkey, South Africa again; or parts of it: Japan, New Zealand (knowledge) We will encourage a repeat measure with pilot countries Additional analysis and reporting The OECD/INFE will continue to use the pilot data to inform the work of the subgroups and related research; and publish the results

Thank you! Comments and questions are welcome adele.atkinson@oecd.org Please also let us know if you have used any of our questions, or intend to do so. The questionnaire and guidance plus supplementary questions are available on our website. www.financial-education.org See also http://www.finlitedu.org/ for outputs from the Russian Trust Fund