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Study: Two Out of Three Adults Financially Illiterate

FILE - Residents of the United States scored an unimpressive 14th place in world rankings of financial literacy.

Two out of three adults world-wide are financially illiterate, according to a report published Wednesday.

The 2014 Gallup survey of 150,000 people in 148 nations asked people to answer questions about risk, inflation, and compound interest.

Researchers from the World Bank and George Washington University analyzed the data, and found most people incorrectly answered questions on more than one of four topics. Men generally got slightly better test scores than women.

The study is called "S&P Global FinLit Survey" and authors describe it as the largest and most comprehensive global measure of financial literacy to date.

Respondents in Scandinavian nations were the best in the world with around seven out of ten people getting mostly correct answers. At the bottom of the list came Yemen, Albania, and Afghanistan where only about one in seven people passed the test.

Residents of the United States scored an unimpressive 14th place in the rankings, with just 57 percent of people passing the brief exam. Compound interest was the topic that caused the most problems for Americans.

'Alarming' data

Dr. Annamaria Lusardi, of the Global Financial Literacy Excellence Center at the George Washington University said the report is “alarming” because it shows “pervasive” ignorance at a time when many nations are shifting more financial responsibilities to individuals.

She said many people are now called upon to evaluate the merits of more complex financial products and may lack the skills to make wise choices.

In a VOA interview, Professor Lusardi says people who lack financial skills are less likely to plan for the future and save money. They are also more likely to take high-cost loans, and have problems with debt. The result may be a lower level of well-being for many people.

She also says financial ignorance can hurt nations by making voters less able to understand the economic consequences of tax and policy proposals.

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