Lack of financial literacy in Europe leads to inequality

Lack of financial literacy reinforces inequality. Why? Keep on reading

What is financial literacy?

Financial education, according to the OECD, is defined as:

  • Understanding financial concepts and risks
  • Developing skills and confidence in financial matters
  • To make informed financial decisions

This enables learners to better understand the financial world, and thus to stop being afraid to invest.

Europeans’ lack of financial knowledge affects their investment decisions

In Europe, financial literacy remains low and reflects social inequalities in education, family background, financial resources and gender.

49% of 18-20 year olds have not been taught about financial concepts during their schooling and 73% about budgeting and personal finance.

3 out of 4 French people feel they lack financial knowledge and 60% say they are not able to choose or discuss a financial product.

69% of French people consider their knowledge to be rather insufficient, or even weak, concerning financial matters.

According to a 2021 study by the association Possible Finance, 70% of adults do not master the basic concepts of finance. This figure can even reach 75% for the Millenials generation.

The results of a CREDOC survey on the financial culture of the French reinforce this observation:

Only one person out of two knows that €100 invested at 2% per year leads to a capital of €102 after one year

One person out of four manages to find the definition of a bond in a list of three possible answers

Only 45% know what a mutual fund is and 52% know the principle of a dividend

Lack of financial literacy, a factor in inequality

Lack of financial literacy also increases inequality

According to a study by the American University of Minnesota, financial education is very unequal according to financial resources, gender and level of education.

According to this study, women have a knowledge score that is 10% lower than men. In addition, an investor with a university degree is 30% more likely than a high school graduate.

If this study was carried out on an American population, we can assume that the influence of these demographic elements affects European savers in a similar way.