6 Eye-Opening Facts About Financial Literacy

Financial literacy, the ability to grasp and exercise our understanding of basic financial concepts in our behavior, is an important life skill to sharpen. It is key not only to the management of our spending and saving, but also to healthier living conditions overall.

Every November since 2010, Canada celebrates financial literacy month, highlighting the importance of building financial literacy and financial resilience in one’s life. National financial literacy month is also recognized in April in some American states.

More needs to be done to encourage the public to keep learning when it comes to their finances. Despite the importance of financial literacy, it remains in a precarious state around the world. 

Here are six facts about financial literacy. Learn why, looking forward, financial and educational institutions, alongside financial technology companies and governments, must make the development of this ability a priority. 

Understanding risk diversification, inflation, interest compounding, and numeracy should be at the reach of all, so all have a chance at making a better life for themselves and for their families.‍

1. 33% of adults worldwide are financially literate.

The percentage of financially literate adults vary when considering their country’s income level, their individual income level, their education level, their age, and their gender.

For instance, people living in low-income countries or receiving low wages, tend to be disadvantaged by the circumstances they find themselves in. Accessing financial education can be challenging, costly or even time-consuming.

Women, older adults, and those with limited education also tend to struggle with financial concepts they are less familiar with, especially if they were not allowed the learning opportunities those who are more financially literate had.

2. 35% of men are financially literate compared to 30% of women.

Across developed and developing countries, women tend to struggle more with financial concepts than men. They are also more likely as financial literacy survey respondents to answer that they do not know compared to their male counterparts.

Unequal opportunities around the world in finance and education plays a role in this gap in financial literacy, as well as the socialization of women, who may be discouraged to pursue greater financial literacy.

3. Globally, only 38% of bank account owners are sufficiently financially literate.

Indeed, financial illiteracy affects more people than we think it does. On one hand, many bank accounts remain underutilized by their owners.

On the other hand, many bank account owners misunderstand the very concepts on which the current financial system is built, which can lead to risky personal financial behavior like accruing credit card debt, for instance.

Efforts for financial accessibility must include efforts for financial literacy for the good of all financial account owners, existing and new.

4. The average American lost $1,506 to financial illiteracy in 2023.

This represents a substantial amount of money both in a year and over a lifetime. In becoming more financially literate, we would be able to make informed decisions that will advantage our savings in the long run, and in turn, the quality of our life.

The cost of financial illiteracy, on the other hand, particularly hurts those in a vulnerable financial position. Furthermore, it keeps them in this position.

5. The increase in financial literacy has the potential to reduce poverty.

Studies conducted in developing countries around the world have shown a strong link between gaining in financial literacy and emerging from poverty, notably by increasing impoverished households’ consumption of food and other goods.

This substantiates the idea that having access to financial education and adapting our financial behavior to what we learn has a real and substantial potential to better our lives, by allowing us to have more funds to invest further in all aspects of our lives, including our futures.

6. Mobile technology can be leveraged as a tool to help improve financial literacy.

With a growing number of people in both developed and developing countries having access to a mobile phone, the prevalence of this technology constitutes great potential for improving the accessibility and reach of financial education resources.

Beyond this, its versatility provides freedom as to how to convey valuable information in engaging ways, allowing for gamified learning, for example. The pedagogical potential of mobile technology is not to be underestimated.

Conclusion

Financial literacy has great impacts on all of us individually and the societies we live in. Financial literacy month is a good time to become more aware of the effects of financial literacy in our lives, but working on our financial knowledge has to be a year-long effort. To learn about the current barriers restraining the development of this crucial life skill around the world, read our blog post on its global state. 

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Frequently Asked Questions

What Financial Basic Knowledge Is Sufficient to Be Considered Financially Literate?

Concepts like risk diversification, interest compounding, inflation and basic numeracy are essential to understand in order to be considered sufficiently financially literate.

Why Is Being Financially Literate Important?

Financial literacy is key in emerging from poverty, and most importantly, staying out of poverty. Financial literacy enables us to make the right financial decisions for a better life.

Are More Men Financially Literate than Women?

Cultural and social factors like gender roles play a part in why 30% of women around the world are financially literate compared to 35% of men.