moneyland.time23 April 2012 09:53 PM
The global movement to teach individuals how to better handle their financial affairs is just getting started, and a survey that Visa International will unveil today shows just how far the movement has to go. Financial literacy scores in the 28 nations that were polled topped out at just over 50%–a flunking mark by almost any standard.
The highest score went to Brazil (50.4%), followed by Mexico (47.8%), Australia (46.3%), the U.S. (44.6%), Canada (43.8%) and New Zealand (43.7%). At the bottom were Pakistan (27.3%), Indonesia (27.7%), Vietnam (31.8%), South Africa (34%) and Morocco (34.4%). While all the scores were low, countries at the top generally are regarded as having the strongest financial education policies, especially Australia, Canada, New Zealand and the U.S. So perhaps there has been some payoff.
Most striking about the survey is that two developing economies wound up on top—Brazil and Mexico. Yet Visa officials explain that may not be such an oddity. “Don’t mistake wealth for financial literacy,” says Jason Alderman, Senior Director of Global Financial Education. He’s right of course. How many celebrities wind up flat broke? Poor nations often end up near the top of global happiness polls, too.
“Brazil and Mexico are emerging economies,” Alderman says. “But their people understand the financial fundamentals that many in developed countries do not: You need to save for emergencies and teach your children about money from an early age.” That evidently isn’t happening most places. The survey found that most people in the world have less than three months of living expenses set aside for emergencies and that family money talk is exceedingly rare.
Visa polled individuals in five areas of personal finance: budgets, emergency funds, family discussion of money issues, teen financial preparedness, and school-based financial education programs. The rankings are based on a combined score across the five categories. Key findings:
- Income and financial fitness are not the same thing In Canada, 39% of those with less than a three-month emergency fund are high earners while just 34% are low earners. This is a common experience across country lines.
- Young people are not learning about money In most countries, a majority of those polled said teenagers and young adults do not understand money-management basics. The U.S. posted its lowest score on this question and finished at the bottom of the pack.
- Asians are the best savers The Chinese were the best at saving with an average 3.9 months of expenses saved. They were followed by Taiwan, Hong Kong and Japan. The U.S. averages 2.9 months and came in 6th place.
- The family talks about money in Latin America Mexico and Brazil topped the list of places that parents talk with their kids about money. Mexicans talk with their kids about money 42 days a year, on average, and Brazilians 38. American families talk with their kids about finances 26 days a year.
- Brazilians get an early start Brazilians believe that schools should start financial education at the age of nine. Vietnam fell on the opposite end of the spectrum, believing schools should start this line of teaching at age 14. In the U.S. the average age that people felt that government should require kids to start learning about money was 12.
To honor Financial Literacy Month in April 2012, Visa released a survey of international financial literacy that tallied answers from more than 25,000 participants in 28 countries. Respondents were asked five questions relating to money management, and received an overall score based on a 0 to 100 scale. The survey revealed that Brazil topped the chart as the most financially literate country, with a score of 50.4 out of 100.
Few key findings from the survey:
68% of respondents have fewer than three months’ worth of emergency savings.
25% of high income respondents had less than three months of savings.
More than half of the countries believed that their young do not understand finances.
Wealthier nations spent the least time talking to their children about money.
Worldwide the youngest and oldest are the least prepared for financial setbacks.
Infographic (source)
What can Indian’s do to increase financial awareness among children’s? One solution is to make them independent at a very early age. Parents should teach their children’s on how to spend money, not only that but also how to earn it.
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