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GLOBAL FINANCIAL LITERACY

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Standard & Poor’s Ratings Services Global Financial Literacy Survey

Financial literacy is a critical barrier to financial and economic participation. Because of a lack of knowledge about finance and financial products, many people – especially the poor and women – are not able to access banking and financial services, and are therefore kept out of financial markets.

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What is Financial Literacy?

Financial literacy is the ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it, or how that person donates it to help others.

McGraw Hill Financial (MHFI)’s Corporate Responsibility commitment is to contribute to closing the global financial inclusion gap. We believe that increased financial literacy is linked to financial inclusion, economic opportunity, and the development of stronger capital markets all over the world.

That is why MHFI worked with Gallup to create the S&P Ratings Services Global Financial Literacy Survey – one of the most extensive measurements of global financial literacy to date. The survey was based on interviews with more than 150,000 adults across 148 countries. Of the 148 countries targeted for data collection in 2014, 144 countries successfully collected data and met Gallup quality standards.

We believe the survey’s findings will provide important data to regulators, sovereigns, NGOs and policymakers, to help them understand people’s current knowledge of basic financial concepts.


Watch Our Video to Learn About the Survey’s Findings.

One of the Most Extensive Measurements of Global Financial Literacy Research to Date

The Standard & Poor’s Ratings Services Global Financial Literacy Survey (S&P Global FinLit Survey) is one of the most extensive measurements of global financial literacy to date. The survey probes four basic financial concepts: numeracy (debt), risk diversification, inflation, and compound interest (saving). The data was collected in 2014 by Gallup as part of its Gallup World Poll and was analyzed by researchers from the World Bank and The George Washington University (Global Financial Literacy Excellence Center). The survey results come from interviews conducted with more than 150,000 adults in 148 countries. Of the 148 countries targeted for data collection in 2014, 144 countries successfully collected data and met Gallup quality standards.

The goal of the survey is to inform and empower academics, regulators, policymakers, and business associations to analyze, construct, and evaluate policies based on a sound understanding of the knowledge gaps that constrain and characterize individuals’ financial well-being and economic participation.

Our Views About Financial Literacy

Financial literacy is a critical barrier to financial inclusion, or access to financial services, such as a checking account, a savings account or credit. Because of a lack of knowledge about finance and financial products, many people – especially the poor and women – are not able to access banking and financial services, and are therefore kept out of financial markets.

Financial literacy is critical to people’s financial and economic well-being, and to the overall health of a country’s economy. When people are able to make informed financial choices regarding saving, housing, education, budgeting, and their careers, they become more able to realize their full potential.

McGraw Hill Financial (MHFI), the parent company of Standard & Poor’s Ratings Services, is committed to contributing to addressing the barriers that hinder people from accessing the financial services and capital they want and need to create opportunities for themselves and their communities. We believe that increased financial literacy is linked to financial inclusion, economic opportunity, and the development of stronger capital markets all over the world.

That is why we worked with Gallup, the World Bank Development Research Group, and The George Washington University to conduct the Standard & Poor’s Ratings Services Global Financial Literacy Survey (S&P Global FinLit Survey). We believe the survey’s findings will provide important data to regulators, sovereigns, NGOs and policymakers so they can develop more informed policies to counter financial literacy gaps.


Survey Methodology

The five questions of the Standard & Poor’s Ratings Services Global Financial Literacy Survey (S&P Global FinLit Survey) were carefully designed and mapped to probe four basic financial concepts:

  1. Numeracy
  2. Risk diversification
  3. Inflation
  4. Compound interest (saving and debt)

The questions were:


1.

Risk Diversification:

Question: Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?


2.

Inflation:

Question: Suppose over the next 10 years the prices of the things you buy double. If your income ALSO doubles, will you be able to buy less than you can buy today, the same as you can buy today, OR more than you can buy today?


3.

Numeracy and Comparison (Debt):

Question: Suppose you need to borrow $100. Which is the lower amount to pay back: $105 or $100 plus three percent?


4.

Interest Compounding (Saving):

Question: Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add MORE money to your account the second year than it did the first year, or will it add the same amount of money both years?


5.

Interest Compounding (Saving and Numeracy):

Question: Suppose you had $100 in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account?


Interview Procedure

Surveys were conducted face-to-face in economies where telephone coverage represents less than 80 percent of the population or is the customary methodology. In most economies the fieldwork was completed in two to four weeks. In economies where face-to-face surveys were conducted, the first stage of sampling was the identification of primary sampling units. These units are stratified by population size, geography, or both, and clustering is achieved through one or more stages of sampling.

Where population information was available, sample selection was based on probabilities proportional to population size; otherwise, simple random sampling was used. Random route procedures were used to select sampled households. Unless an outright refusal occurred, interviewers made up to three attempts to survey the sampled household. To increase the probability of contact and completion, attempts were made at different times of the day and, where possible, on different days.

If an interview could not be obtained at the initial sampled household, a simple substitution method was used. Respondents were randomly selected within the selected households by means of the Kish grid. In economies where cultural restrictions dictate gender matching, respondents were randomly selected through the Kish grid from among all eligible adults of the interviewer’s gender.

In economies where telephone interviewing was employed, random digit dialing or a nationally representative list of phone numbers was used. In most economies where cell phone penetration is high, a dual sampling frame was used. Random selection of respondents was achieved by using either the latest birthday or Kish grid method. At least three attempts were made to reach a person in each household, spread over different days and times of day.

Data Preparation

Data weighting was used to ensure a nationally representative sample for each economy. Final weights consisted of the base sampling weight, which corrects for unequal probability of selection based on household size, and the poststratification weight, which corrects for sampling and nonresponse error. Poststratification weights use economy-level population statistics on gender and age and, where reliable data are available, education or socioeconomic status.

  • Errors that can affect survey validity included measurement error associated with the questionnaire, such as translation issues, and coverage error, where a part of the target population has a zero probability of being selected for the survey.
  • The data collection period, number of interviews, approximate design effect, and margin of error, as well as sampling details for each economy, is available here.
  • Additional information about the methodology used in the McGraw Hill Financial Global FinLit Survey can be found here.
  • The reference citation for the data is: “McGraw Hill Financial Global FinLit Survey data; https://www.finlit.mhfi.com

Spokespeople & Researchers

Dr. Annamaria Lusardi, Academic director of the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University

Leora Klapper, Lead Economist at the World Bank Development Research Group, analyzed the survey data.


Key Findings

Data Highlights, INFOGRAPHIC & SHAREABLE GRAPHICS



Asia

Key Data from the Survey


Download the Full Data Set (XLSX)
Download the Financial Literacy Around the World Report (PDF)

Download the Full Data Set (XLSX)
Download the Financial Literacy Around the World Report (PDF)

Two-Thirds of Adults Worldwide Are Not Financially Literate and Significant Gender Gap Exists, Finds Global Study

S&P Survey –conducted by Gallup, GFLEC, and World Bank – finds major deficiencies globally in understanding of savings and borrowing; U.S. has large financial literacy gaps across gender, income, and education

WASHINGTON, D.C. Nov. 18, 2015 – In one of the most extensive measurements of global financial literacy to date, the Standard & Poor’s Ratings Services Global Financial Literacy Survey (S&P Global FinLit Survey) released today finds that two-thirds of adults worldwide are not financially literate and there is a wide gap between men and women’s literacy, including in highly developed countries.

The survey results come from interviews conducted with more than 150,000 adults in more than 140 countries who were tested on their knowledge of four basic financial concepts: numeracy, interest compounding, inflation, and risk diversification. The data were collected in 2014 by Gallup as part of the Gallup World Poll and analytical support was provided by researchers at the World Bank Development Research Group and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University.

According to the study, the U.S. with a financial literacy rate of 57 percent, trails behind coun-tries such as Germany, Israel, New Zealand, and Norway.

The S&P Global FinLit Survey shows that in almost every country there is a material gap be-tween men and women. Worldwide, there is a five-point gender gap, with 35 percent of men being financially literate compared with 30 percent of women. In the U.S., men’s financial literacy averages 10 percentage points higher than women’s. Notably, in China and South Africa, there was no gender gap.

The S&P Global FinLit Survey also found that Americans with less education and lower incomes are less financially literate than their counterparts in other developed, wealthy countries. U.S. adults have a relatively weak understanding of compound interest, the survey found, even though Americans’ credit card use is among the highest in the world according to the World Bank Global Findex database.

“We are committed to creating stronger financial markets all over the world,” said Courtney Geduldig, Executive Vice President of Public Affairs at McGraw Hill Financial, parent of S&P. “We believe there are correlations between financial literacy, financial access, and the strength of markets. Addressing financial literacy is a key strategy in building stronger, more accessible and sustainable markets around the globe.”

Additional findings from the S&P Global FinLit Survey include:

  • Within the G7 group (Canada, France, Germany, United Kingdom, Italy, Japan, and the United States) of countries, financial literacy varies enormously, from a low of 37 percent in Italy to a high of 68 percent in Canada.
  • In the U.S., about 60 percent of adults have a credit card. According to the survey findings, more than a third of these adults have relatively low financial literacy, and 34 percent could not answer the question on compound interest correctly.
  • 30 percent of Americans who finance their homes through bank financing could not answer the question on compound interest correctly.
  • 61 percent of adults in China do not save for old age. About 72 percent of those non-savers have low financial literacy, according to the survey findings.
  • About 47 percent of adults in India – 415 million adults – lack a bank account. Roughly 80 percent of those without bank accounts have weak financial literacy. 
  • There is wide variation in financial literacy rates across economies in Sub-Saharan Africa. At 15 percent, Angola and Somalia are among the countries with the world's lowest financial literacy rates. At 52 percent, Botswana's rate is the region's highest and comparable with the average of high-income OECD economies.

“With technology spreading the design of innovative banking services and payment methods, it’s critical that we understand who knows what around the world,” said Leora Klapper, lead economist, the World Bank Development Research Group. “My hope is that this data will help policymakers in finding ways to boost financial literacy and consumer protection and help open the door to greater financial inclusion and economic empowerment.”

Annamaria Lusardi, the Academic Director of GFLEC, further noted “This data clearly shows we need to step up the effort to improve financial literacy around the world. And we need to focus on some vulnerable groups, such as women and the young.”

A comprehensive overview of the survey findings can be found at www.FinLit.MHFI.com.


About Standard & Poor’s:
Standard & Poor’s Ratings Services, is the world's leading provider of independent credit risk research and benchmarks. We have approximately 1.2 million credit ratings outstanding on government, corporate, financial sector and structured finance entities and securities. With nearly 1,400 credit analysts in 26 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information and independent benchmarks that help to support the growth of transparent, liquid debt markets worldwide.

About McGraw Hill Financial: 
McGraw Hill Financial (NYSE: MHFI) is a leading financial intelligence company providing the global capital and commodity markets with independent benchmarks, credit ratings, portfolio and enterprise risk solutions, and analytics. The Company's iconic brands include Standard & Poor's Ratings Services, S&P Capital IQ and SNL, S&P Dow Jones Indices, Platts, CRISIL, and J.D. Power. The Company has approximately 20,000 employees in 31 countries. Additional information is available at  www.mhfi.com.


Media Contacts

John Piecuch
Senior Director, Communications (Americas)
Standard & Poor's Ratings Services

Office: +1 (212) 438-1579

john.piecuch@standardandpoors.com


Martin Winn
Vice President, Communications (EMEA & Asia Pacific)
Standard & Poor's Ratings Services

Office: +44 (0) 20 71763740

martin.winn@standardandpoors.com

Erica Hiar
CrossCut Strategies
+1 (202) 579-7605

erica@crosscutstrategies.com


Contact - S&P Global FinLit Survey

Media Contacts

John Piecuch
Senior Director, Communications (Americas)
Standard & Poor's Ratings Services

Office: +1 (212) 438-1579

john.piecuch@standardandpoors.com


Martin Winn
Vice President, Communications (EMEA & Asia Pacific)
Standard & Poor's Ratings Services

Office: +44 (0) 20 71763740

martin.winn@standardandpoors.com

 

Survey Contacts

Louise Raymond
Vice President, Corporate Responsibility
McGraw Hill Financial

+1 212-438-1273

louise.raymond@mhfi.com


Leora Klapper
Lead Economist
World Bank Research Development Group

+1 (202) 473-8738

lklapper@worldbank.org

https://sites.google.com/site/leoraklapper


Annamaria Lusardi
Denit Trust Chair of Economics &Accountancy, Academic Director
Global Financial Literacy Excellence Center
The George Washington University

+1 (202) 994-8410

alusardi@gwu.edu


Jon Clifton
Managing Director
Gallup Global Analytics

+1 (202) 715-3030

Jon_Clifton@gallup.com