Financial literacy is essential in today’s complex financial world. It’s considered a core life skill needed to empower individuals and bolster the financial well-being of individuals and societies. Financially literate individuals are better equipped to make sound financial decisions, leading to enhanced financial well-being. This is especially important during times of economic uncertainty, as it helps individuals navigate challenges like inflation, rising interest rates, and the evolving landscape of digital financial services.
Countries around the world, including Canada, have recognized the need to put more emphasis on financial literacy levels and inform effective policies and programs. By understanding the level of financial literacy in a population, policymakers can create targeted strategies and programs to address knowledge gaps, promote responsible financial behaviours, and ultimately contribute to a more stable financial system.
Financial Literacy Month in Canada
Since 2010 the Government of Canada has been celebrating Financial Literacy Month each November. They use this time each year to educate and encourage Canadians to expand and improve their financial knowledge and practices.
These efforts were increased even more in 2015 with the implementation of the National Financial Literacy Strategy. The initiative was so successful that continued on into a 2nd iteration with the vision of, “A Canada where everyone can build financial resilience in an increasingly digital world.”
To put this strategy into action, each year the Canadian government focuses on a particular personal finance theme. Previous themes have included topics such as managing expenses and being ready for a financial emergency. This year’s theme is “Money on your Mind. Talk about it!” The vision is to eliminate the stigma around talking about money. The hope is by removing the stigma more people will talk about money and inevitably learn better financial skills.
Financial literacy survey
The Organisation for Economic Cooperation and Development (OECD) and the International Network on Financial Education (INFE) have been instrumental in helping countries measure and improve financial literacy. They do this by sharing the findings they acquired from coordinating international surveys since 2009.
Participating countries invite their citizens to take part in the surveys and then the results are compiled together to get a global overview of the financial literacy landscape.
These surveys not only address financial literacy and its components, but also reveal insights into variances of financial literacy levels between various groups such as gender, age, and socioeconomic levels. Below, we look at each of these areas and discuss what these surveys revealed.
It’s important to note that each iteration of the survey didn’t have the same grouping of participating countries. For example, so far, Canada only participated in the 2016 survey. Even so, the results still give an interesting global perspective on financial literacy.
For comparison, the findings have been split into two groups. The first is all of the participating countries. The second group only includes those countries that are working with OECD and INFE.
Defining financial literacy
Financial knowledge, behaviours and attitudes combined to form overall financial literacy. Each of these components needs to be in place to make way for a financially healthy life.
Financial knowledge establishes how well-versed someone is in core financial calculations and concepts. This includes things like interest calculations and the relationship between time and money. These are key when comparing financial products and when determining how best to move forward when circumstances change.
Financial knowledge, while great, doesn’t have much impact unless put into action. Consistently putting good financial behaviours, like budgeting, saving, and paying bills on time, into practice is when a person’s finances really take a turn for the better.
A person’s attitude towards their finances also plays a big part in their overall financial wellness. For example, some people may value spending now rather than saving.
Overall financial literacy findings
| SURVEY YEAR | 2016 | 2020 | 2023 |
| ALL | 63 | 60 | 60 |
| OECD | 65 | 62 | 63 |
The chart above outlines average overall financial literacy levels. As such, they include the combined results of the answers to the knowledge, behaviour and attitude survey questions.
There are a couple of things to note about this information. The first is that the overall numbers actually dropped from 2016 to 2023. It can be speculated that the reason for that is that a few countries that did well in 2016 did not participate in follow-up surveys. The second is that, in general, OCED countries fared better. This is a consistent trend that flows through all the categories and surveys.
For perspective, the survey noted that they deem a result of 70 or above as a guideline for sufficient financial literacy. That means, on a global scale, we are lacking in financial literacy. Sometimes by as much as 10%.
Some countries fared better than others. For example, looking at countries that participated in each round of the survey, Hong Kong did well (2016 – 69, 2020 – 70, 2023 – 70) while Croatia has consistently improved (2016 – 57, 2020 – 58, 2023 – 62). In 2016, Canada landed 4th highest at 70.
Financial literacy by socioeconomic level
| 2023 SURVEY | Low income | Medium income | High income |
| ALL | 55 | 62 | 66 |
| OECD | 58 | 64 | 69 |
This chart shows the overall 2023 financial literacy level results grouped by socioeconomic level. It’s interesting to note that as people earn more their financial literacy levels consistently get better. That goes for all participating countries and OCED countries.
There’s a bit of a chicken or egg situation with this grouping of results. It’s not really clear as to whether people are earning more because they know more or that they know more so have better money management practices. While only an assumption, it can be speculated that having more money at your disposal gives people access to more and better financial resources and expertise. This being the case, these people would naturally integrate more financial knowledge.
Financial literacy level by age
| AGE | 18 – 29 | 30 – 59 | 60+ | |||
| SURVEY YEAR | 2020 | 2023 | 2020 | 2023 | 2020 | 2023 |
| ALL | 58 | 59 | 61 | 62 | 58 | 58 |
| OECD | 60 | 60 | 63 | 64 | 60 | 61 |
The ironic thing about what’s interesting about the chart above is that it’s “not interesting”. The data shows that when it comes to age there really isn’t much variation in the level of financial literacy. It also shows that financial literacy levels have remained consistent over the last couple of survey rounds.
The good news is that that means things didn’t get worse. That’s especially good news considering the world was going through the tumultuous period that was the pandemic during the time in between these surveys. The bad news is, it also means we didn’t get any better.
Financial literacy level by gender
| MALE | FEMALE | |||
| SURVEY YEAR | 2020 | 2023 | 2020 | 2023 |
| ALL | 60 | 62 | 60 | 59 |
| OECD | 63 | 64 | 61 | 61 |
Looking at the chart above we see what overall financial literacy levels are when comparing gender. What’s great to see is that there isn’t really that much difference. Each gender has remained stable over the course of the last two survey rounds. The only drop was seen from the calculation of the average score of all females in all countries. Even that drop was only slight at just 1 point.
It’s worth noting that none of these groups passed the official minimum target number of 70.
Turning data into financial health
While it’s great to know all these stats, knowledge, without any action behind it, doesn’t mean much. That leaves us asking where do we go from here? What can be done to improve financial literacy on a global scale? The OECD and INFE have made a few suggestions for global policymakers to consider.
Strengthen foundational knowledge
The survey consistently reveals weaknesses in basic financial concepts like simple and compound interest, inflation, and risk diversification. These concepts are essential for understanding savings and credit products. It’s recommended that policymakers prioritize educational initiatives that address these knowledge gaps.
Promoting positive behaviors
Recommendations also included focusing on encouraging positive financial behaviours such as budgeting, saving, and long-term planning by making financial processes more user-friendly. The easier it is to do something the more likely people are to follow through.
Understand financial attitudes
Recognizing public attitudes toward finances is essential for designing effective policies. The survey indicates that many people prioritize immediate gratification over long-term financial goals. Policymakers can use this insight to create initiatives that shift this mindset.
Addressing the needs of vulnerable groups
The survey consistently shows that certain groups, including women, young people, and older generations tend to have lower financial literacy and well-being scores. Policymakers would likely see the greatest improvement by using targeted strategies that address the specific needs of these groups. This might involve:
- Implementing gender-sensitive policies to improve women’s financial literacy.
- Starting financial education early, ideally in school, to equip young people with essential financial knowledge.
- Creating programs tailored to the needs of those who might face challenges related to retirement planning or managing finances on a fixed income.
Wrap up
More and more people are recognizing how deeply financial well-being and overall well-being are intertwined. This recognition ignited a movement to improve financial literacy on a global scale. OECD/INFE are just two of the groups spearheading this movement. Their surveys are a great start, but there’s still much that can be done. It’s up to citizens and policymakers to take the baton and push things further. It’s an initiative worth the effort because improving financial literacy is a golden opportunity to uplift everyone.
