EU citizens are not doing well when it comes to financial literacy. Nearly half lack an understanding of basic financial concepts, including inflation.
A third of Europeans do not understand how inflation works, according to a survey by Eurobarometer. The same survey revealed only 18% of EU citizens were able to show a high level of financial literary.
According to the survey, 65% of EU citizens are aware that, in times of positive inflation, the purchasing power of their money decreases, meaning they can buy less than they could before with the same amount of money.
Lack of knowledge about inflation could be seen as concerning
In October 2022, the annual inflation in the EU reached levels not seen before in the previous four decades at 11.5%. While the rising cost of living was the most pressing worry for 93% of Europeans at that time, apparently a third of EU citizens do not know how inflation affects their lives.
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The best performers were the Netherlands (43%), Denmark (40%), Finland (40%) and Estonia (39%) where about four in 10 respondents display a high level of financial knowledge.
Romania and Portugal reported the worst scores in high levels of financial knowledge at 13% and 16%, respectively.
The questions weren’t about esoteric financial instruments that allow the rich to get away with murder, they were home ec style questions:
Stuff like
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Imagine that someone puts €100 into a savings account with a guaranteed interest rate of 2% per year. They don’t make any further payments into this account and they don’t withdraw any money. How much would be in the account at the end of five years, once the interest payment is made?
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Now imagine the following situation. You are going to be given a gift of [€1,000] in one year and, over that year, inflation stays at 2%. In one year’s time, with the [€1,000], will you be able to buy: [more, less, or the same]
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Which of the following is true? An investment with a higher return is likely to be: [more risky, less risky]
Maybe part of the reason governments keep bailing out bad financial moves by private companies is because the electorate has decided investing is black magic and ignores it.
Thank you for starting a sensible comment thread. Unless we plan to go back to bartering, basic financial literacy is important. It doesn’t make you an evil exploiter to understand that we use money as a go-between for trading goods and services and what the consequences of that can be for someone trying to build a life or business.
Unless we plan to go back to bartering, basic financial literacy is important. It doesn’t make you an evil exploiter to understand that we use money
Pretty much this. If people have a better understanding of how our system is supposed to work, they’ll get angry when the
richbad people take advantage of it.
€100 into a savings account with a guaranteed interest rate of 2% per year. How much would be in the account at the end of five years, once the interest payment is made?
That’s an insanely hard problem to know the equation and do it in your head. Because the interest compounds (current year plus interest adds to last year’s total).
The equation is P( (1+r/n)^t*n -1)
Check the article. It’s pretty easy to choose the right option.
If someone asked me to calculate it in the street I would be blue screening but here it was a multiple choice with the options set in a way that you don’t really have to calculate compound interest at all, you just had to know it exists (over 110€).
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Fascinating how Finland has one of the best literacy scores and worst behaviour scores. Apparently Finns understand how to be financially responsible and simply do not care for it
How can anyone expect to be financially literate when the rules of capitalism keep changing and economists never agree with each other on anything?
Inflation is not exactly a new concept, and not that difficult to understand. I
Ask 10 economists if inflation is beneficial or detrimental to an economy and see how many answers you get.
Sure, it’s good to know that “you likely can’t afford as much in periods of inflation” but that really doesn’t tell you much. It certainly tells you nothing that you really need to know like what you can do about it.
What a straw man. The question is: what is inflation? Not: is inflation beneficial or detrimental.? The latter is indeed a more subtle question, but that’s
No, the question was how financially literate are Europeans. Hence the headline: How financially literate are Europeans? Not very - but who knows most?
And my answer is still- it’s basically impossible for most people, if anyone, to be financially literate in 2024.
That isn’t true. I’m literate as well as all my friends.
Lemmy is just an echo chamber of financial illiteracy. It’s mind boggling how few basic concepts are understood here.
The questions are in the article I see there missed all the time here.
Lemmy is just an echo chamber of financial illiteracy.
I mean, maybe that’s true – I’ve seen no poll on here.
But I think that the article’s point stands, and it’s talking about a Eurobarometer poll of Europe as a whole and Europe not doing so well. That’s not just a tiny pocket somewhere.
Are you literate or do you think you’re literate? Have you and your friends taken any evaluations to back that up? If so, who designed the evaluations?
Because I bet could I find an economist who would tell you that all sorts of things you think you know about how economies were are entirely wrong. And then a second one to tell you that everything that the first economist says is wrong.
I just the evaluation listed in the article. I got 100%. It’s only 5 questions.
You are confusing with economics with financial literacy. Not exactly the same things
Americans generically are horrible at financial literacy. It’s something that should be taught in school. It was when they went to high school. Hence why I can answer the questions easily.
Because that’s an opinion question. Very different to ‘what is inflation?’
This isn’t even true though. The vast majority will agree that a little bit of inflation is good, deflation is very bad, and hyperinflation is essentially cataclysmic.
The questions are basically “what is inflation?” and “what did they teach you in high school about investing in stocks?”
They’re pretty trivial.
I agree that the rich are able to get away with weird financial fuckery because they own regulators. But that may be because the average voter doesn’t understand how investments are supposed to work.
I think some of the questions there are trivial. I don’t think all of them are. Take the third question. I don’t think it’s a trivial question and I don’t think that not knowing that bond prices drop when inflation rises is something that shows financial illiteracy. It’s not really something most people have to worry about in the first place in terms of something within their control.
Yeah, the bond question doesn’t seem relevant to most people (unless they’re building a trading portfolio), but the questions on inflation and buying power shrinking over time are extremely important.
This is the best summary I could come up with:
The best performers were the Netherlands (43%), Denmark (40%), Finland (40%) and Estonia (39%) where about four in 10 respondents display a high level of financial knowledge.
While the scores of France and Italy were slightly below the EU average, this figure was noticeably low in Spain at 19%.
Proportion answering this question correctly (“Less than you could buy today”) was below 60% in Cyprus, Portugal, Greece, Romania, and Italy whereas Finland and Estonia had the highest share at 84%.
The proportion with a high score varied between from 11% in Portugal and Latvia to 27% in Denmark, Slovenia and Sweden, and 28% in the Netherlands.
To illustrate, when participants were asked whether they keep track and monitor their expenses, only 16% in Finland replied, “completely agree”.
The EU is working to ensure that its citizens have the knowledge and skills they need to make good financial decisions.
The original article contains 872 words, the summary contains 148 words. Saved 83%. I’m a bot and I’m open source!
