G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 .

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G20/OECD INFE REPORT on ADULTFINANCIAL LITERACY IN G20 COUNTRIESG20/OECD INFECORE COMPETENCIES FRAMEWORK ONFINANCIAL LITERACY FOR ADULTS1G20/OECD INFE CORE COMPETENCIES FRAMEWORK ON FINANCIAL LITERACY FOR ADULTS

OECD INTERNATIONAL NETWORK ON FINANCIAL EDUCATIONOECD governments officially recognised the importance of financial literacy in 2002 with the launch of a unique andcomprehensive project. In 2008, the project was further enhanced through the creation of the OECD InternationalNetwork on Financial Education (OECD/INFE). The OECD/INFE has high-level membership from over 240 publicinstitutions - including central banks, financial regulators and supervisors, ministries of finance and ministries ofeducation - in over 110 countries. Members meet twice a year to share country and member experiences, discussstrategic priorities and develop policy responses. More information is available at www.financial-education.orgPlease cite this publication as:OECD (2017), G20/OECD INFE report on adult financial literacy in G20 countriesThis report is circulated under the responsibility of the Secretary-General of the OECD. The opinions expressed andarguments employed herein do not necessarily reflect the official views of OECD member countries or of the G20.This document and any map included herein are without prejudice to the status of or sovereignty over any territory,to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD 2017. Applications for permission to reproduce or translate all or part of this material should be made to:rights@oecd.org.G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20172

FOREWORDFinancial education has gained a prominent position in the global policy agenda. It is now universallyrecognised as a core component of the financial empowerment of individuals and the overall stability ofthe financial system. Three sets of high-level principles endorsed by G20 Leaders reflect this: InnovativeFinancial Inclusion (2010), Financial Consumer Protection (2011), and National Strategies for FinancialEducation (2012). In addition, in 2016, a new set of high-level principles on Digital Financial Inclusionwere approved by G20 Leaders. Principle 6 recognises the importance and relevance of financial literacycompetencies to allow consumers and small businesses (and especially groups at risk or vulnerable) to takefull advantage of the increasingly digitalised financial landscape.The 2013 G20/OECD publication, ‘Advancing National Strategies for Financial Education’ and the2015 OECD/INFE Policy Handbook, both promote the development of reliable data on the levels offinancial literacy to support the designing phases of national strategies for financial education. At theirsummit in St Petersburg in September 2013, G20 Leaders also welcomed practical tools to increasefinancial literacy and supported using the OECD/INFE financial literacy and financial inclusionmeasurement toolkit (OECD/INFE toolkit).In 2016, the OECD/INFE Survey of Adult Financial Literacy Competencies provided an analysis of30 countries and economies. The internationally comparable data used in the survey were collected usingthe toolkit. The report highlighted worryingly low levels of financial literacy around the world. Itemphasised the need for longer-term strategic approaches to financial education and repeat measures offinancial literacy to show progress over time and reveal gaps in provision.This report responds to a call by G20 Leaders in the 2016 Hangzhou Action Plan for the OECD/INFEto coordinate data collection on financial literacy across G20 countries and to prepare a report for their nextSummit. In this respect, a progress report including available data was shared with, and welcomed by, G20Finance Ministers and Central Bank Governors at their meeting in Baden Baden in March 2017. This finalversion of the report includes information about various aspects of financial literacy within the 21participating countries, analysing the results from 101,596 survey respondents. It has been prepared by theOECD/INFE Secretariat, with input from public authorities and relevant academics in G20 countries andtwo guest countries, the Netherlands and Norway, in co-operation with the G20 German presidency.G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20173

ACKNOWLEDGEMENTSThis publication represents an important component of the work of the OECD International Networkon Financial Education (OECD/INFE), developed in co-operation with the G20 German Presidency. Itwould not have been possible without the collaboration of the 19 G20 countries and 2 guest countries thatsubmitted data and provided feedback on two drafts of the report.The publication was prepared by Adele Atkinson with oversight by Flore-Anne Messy in theFinancial Affairs Division of the OECD Directorate for Financial and Enterprise Affairs. The editing teamincluded Jennah Huxley, Pamela Duffin and Pauline Arbel.G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20174

TABLE OF CONTENTSFOREWORD.3ACKNOWLEDGEMENTS .4EXECUTIVE SUMMARY .7INTRODUCTION .11I. MEASURING FINANCIAL LITERACY .13II. FINANCIAL KNOWLEDGE .15III. FINANCIAL BEHAVIOUR .27IV. FINANCIAL ATTITUDES .39V. OVERALL LEVELS OF FINANCIAL LITERACY .43VI. FINANCIAL INCLUSION .45VII. POLICY IMPLICATIONS .51REFERENCES .57ANNEX 1: DATA TABLES .59ANNEX 2: GUIDE TO CREATING THE FINANCIAL LITERACY SCORES AND FINANCIALINCLUSION INDICATORS .69ANNEX 3: SURVEY INFORMATION .75TablesTable 1.Table 2.Table 3.Table 4.Table 5.Table 6.Table 7.Table 8.Table 9.Table 10.Table 11.Table 12.Table 13.Table 14.Table 15.Table 16.Status of National Strategies in G20 Countries in 2017 .7Financial knowledge questions .15Financial knowledge .19Agrees with financial behaviour statements .30Questions on making ends meet .32Questions on choosing products .35Financial attitude questions .39Status of National Strategies in G20 countries and selected guest countries .51Number of respondents per country .59Self-reported financial knowledge.60Financial knowledge by self-assessed knowledge .60Minimum target score (5 or more) on financial knowledge by gender .61Making financial decisions in a household with a budget .61Active savers .62Making ends meet.63Average financial knowledge score by financial goal .63G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20175

Table 17.Table 18.Table 19.Table 20.Table 21.Table 22.Table 23.Table 24.Table 25.Table 26.Table 27.Table 28.Choosing financial products score .64Minimum target score (6 or more) on financial behaviour by gender .64Has long-term attitude .65Minimum target score (more than 3) on financial attitudes.66Average scores.67Financial product holding .67Indicators of financial inclusion .68Financial literacy levels and financial product holding .68Computing a financial knowledge score.70Computing a financial behaviour score .71Computing a financial attitudes score.73Background information from participating countries .75FiguresFigure 1.Figure 2.Figure 3.Figure 4.Figure 5.Figure 6.Figure 7.Figure 8.Figure 9.Figure 10.Figure 11.Figure 12.Figure 13.Figure 14.Figure 15.Figure 16.Figure 17.Figure 18.Figure 19.Financial knowledge, attitudes and behaviour.8Minimum target score (5 or more) on financial knowledge .20Self-reported financial knowledge.21Average financial knowledge score by self-assessed knowledge .23Minimum target score (5 or more) on financial knowledge by gender .25Making financial decisions in a household with a budget .28Active savers .31Making ends meet.33Average financial knowledge score by financial goal .34Choosing financial products .36Minimum target score (6 or more) on financial behaviour .37Minimum target score (6 or more) on financial behaviour by gender .38Respondents taking a longer-term attitude .40Minimum target score (more than 3) on financial attitudes.41Minimum target score (more than 3) on financial attitudes by gender .42Financial knowledge, attitudes and behaviour.44Product holding .47Indicators of financial inclusion .49Financial literacy levels and financial product holding .50BoxesBox 1.Box 2.Box 3.Box 4.Box 5.Method note on the financial knowledge score .17Gender differences in the financial literacy performance of 15-year-olds .24Identifying people who are actively saving .31Financial knowledge and goal setting .34Measuring the extent to which people are shopping around for financial products .35G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20176

EXECUTIVE SUMMARYAt the launch of the most recent PISA assessment of the financial literacy of students, the OECDSecretary-General stated that ‘financial literacy is an essential life skill’. He explained that ‘financialliteracy can make a crucial difference in the lives of people, in their opportunities, in their success. It is afoundation stone for well-being, for entrepreneurship, for social mobility, for inclusive growth’. This reportseeks to explore the extent to which adults in G20 countries have this essential life skill. The Netherlandsand Norway are also included as guest countries under the German G20 presidency.National survey data is used to compare the financial knowledge, behaviour, attitudes and inclusion of101,596 adults aged 18 to 79 in 21 countries. In most cases, data were collected using the OECD/INFEFinancial Literacy and Financial Inclusion Measurement Toolkit.1As shown in Figure 1, there is considerable scope for improvement in terms of overall levels offinancial literacy, with average scores across the G20 countries that submitted sufficient data of just 12.7out of a possible 21 (made up of a total possible 7 points for knowledge, 9 for behaviour and 5 forattitudes). France (14.9), Canada (14.6) and the People’s Republic of China (hereafter ‘China’) (14.1) arethe only three G20 countries achieving an average above 14 (along with guest country, Norway), whilstfour score below 12 (India, Argentina, Italy and Saudi Arabia).The vast majority of G20 countries have a national strategy in place to tackle these issues, andseveral have revised their strategies to take into account new information and developments (see Table 1).These ongoing efforts must be sustained and improved to impart awareness, knowledge, andunderstanding.Table 1. Status of National Strategies in G20 Countries in 2017Status of the national strategy (NS)CountriesA NS is being revised or a second NSis being implementedAustralia; Indonesia; Japan; United Kingdom; United StatesA (first) NS is being implementedBrazil; Canada; France; India; Russian Federation; South Africa; TurkeyA NS is being actively designedArgentina; China; Italy; Korea; Mexico; Saudi ArabiaMany people do not have basic financial knowledge. On average across G20 countries, fewer thanhalf of adults (48%) could answer 70% of the financial knowledge questions correctly (the minimum targetscore). In particular, understanding of diversification and compounding is weak, two concepts that areessential for people to recognise the consequences of financial decisions such as paying the minimum1There is some variation in the number of countries represented in the various figures and tables in this report dueto the extent to which they applied the OECD/INFE Toolkit when collecting data or provided data that could becompared with questions from the OECD/INFE Toolkit.G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20177

repayment on credit cards, and to manage their increasing responsibility for personal financial security inretirement. Four in ten people did not understand diversification and only 27% of respondents were able toboth calculate simple interest and recognise the additional benefit of compounding over five years.Furthermore, the difference between the percentage of men and women achieving the minimum targetscore for financial knowledge in G20 countries stands at 11 percentage points, with men significantly morelikely to achieve this score than women in all but three of the countries with comparable data. Clearly,financial education must be designed to take into account the significant differences in knowledgeacross men and women, as recommended in the OECD/INFE Policy Guidance on Addressing Women’sand Girls’ Needs for Financial Awareness and Education endorsed by G20 Leaders in 2013.Figure 1. Financial knowledge, attitudes and behaviourStacked points (weighted data): all respondents, sorted by overall score out of 21 (reported in parenthesis)KnowledgeBehaviourAttitudesFrance (14.9)Norway (14.6)Canada (14.6)China (14.1)Korea (13.9)Germany (13.8)Netherlands (13.4)Indonesia (13.4)United Kingdom (13.1)Average, G20 countries (12.7)Turkey (12.5)Russian Federation (12.2)Mexico (12.1)Brazil (12.1)India (11.9)Argentina (11.4)Italy (11.0)Saudi Arabia (9.6)0.05.010.015.020.0‘Average, G20 countries’ reports the mean of the country percentages for all G20 countries with comparable data(excluding the Netherlands and Norway). Each country is therefore given equal weight, irrespective of sample size orpopulation size. Overall scores presented in parenthesis. These may not exactly reflect the sum of the three componentsdue to rounding. G20 countries that are excluded from this chart do not have comparable data.Financial knowledge provides the foundation for informed decisions, but a number of behaviours oractions are also required to improve financial well-being. This report shows that on average in G20countries2, only 52% of adults reached the minimum target of exhibiting 6 of the 9 behavioursdiscussed.Budgeting is widely accepted as being a valuable approach to money management and a componentof financial literacy, as indicated in the G20/OECD INFE Core Competencies Framework on Financial2The number of G20 countries included in each figure may vary depending on availability of comparable data.G20/OECD INFE REPORT ON ADULT FINANCIAL LITERACY IN G20 COUNTRIES OECD 20178

Literacy for Adults developed in 2016 and the PISA financial literacy assessment (OECD, 2014; OECD,2017a). However, on average across G20 countries only three in five households were using a budget(60%), and there was wide variation by country. In addition, on average across G20 countries, a quarter ofpeople did not agree with the statement ‘before I buy something I carefully consider whether I can affordit’; a quarter did not always pay bills on time a

the financial system. Three sets of high-level principles endorsed by G20 Leaders reflect this: Innovative Financial Inclusion (2010), Financial Consumer Protection (2011), and National Strategies for Financial Education (2012). In addition, in 2016, a new set of high-level principles on Digital Financial Inclusion were approved by G20 Leaders.

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