The Global Population: Fundamentally Financially Illiterate

How financially literate is the global population? Not very, according to two important reports, and that’s a big problem. There are significant economic consequences to this knowledge gap that underscore why financial education is essential for everyone.

According to the 2015 S&P Global Financial Literacy Survey, by McGraw Hill Financial, the World Bank, and Gallup, which polled 150,000 adults across 140 countries, most lack education about interest, inflation and risk. In fact, only 30 percent of women and 35 percent of men scored high enough to be labelled as financially literate when answering a series of fairly simple financial questions.

The simplest question posed to survey respondents was:“Suppose you need to borrow $100. Which is the lower amount to pay back: $105 or $100 plus 3%?” A question that only 49 percent were able to answer correctly. Only one-third of those surveyed could answer three out of four answers correctly, giving the global population a literacy rating of a mere 33 percent overall.

The more financially literate the population, the greater the contribution to the global economy…but what’s alarming is that across the board, most people demonstrate that they just don’t know enough.

The under-educated are more likely to make bad investments, avoid seeking financial advice, and fail to plan for retirement, all of which has both personal and societal repercussions. Studies referenced in a report entitled “The Economic Importance of Financial Literacy” also show that those with little financial knowledge carry higher debt loads, which includes high mortgage amounts. As we previously reported, there is a link between over-extending comfortable mortgage amounts, housing costs and newly implemented rules like the mortgage stress test. These things contribute to Canada’s debt load, inflation levels, and have far-reaching economic consequences.

The Canadian economy and our social support programs depend to a great extent on the population being financially literate. Financial education isn’t just for those working in the financial services. Especially when DIY approaches are favoured by many, individuals should be compelled to enhance their circle of knowledge.

Understanding Canada’s complex tax system with The Income Tax Filing Fundamentals certificate course, is a great place to start, since filing an accurate tax return on time is a requirement, and failing to do so is punishable with significant penalties. It’s important for every taxpayer to stay current on tax rules, especially those who file their own taxes, or do so on behalf of friends and family.

Knowledge Bureau offers a number of educational resources that can help you improve your financial literacy. Completion of a certificate course can contribute credits towards a DFA – Personal Tax Services Specialist Designation. Essential Tax Facts, by Evelyn Jacks, and our comprehensive tax and income calculators are additional resources that can help you boost your financial competence. When you’re ready to take that to the next level, also consider attending our CE Summit Workshops. The CE Winter Sessions will offer an Advanced Personal Income Tax Update for 2019.

Additional educational resources:

Want to improve your financial literacy but aren’t sure where to start? Contact our educational consultants to help you set up your custom training plan by calling 1.866.953.4769.

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