- From children’s investment accounts in the US, to pension reforms in Germany, responsibility for building wealth and financing retirement is increasingly shifting from institutions to individuals. While this gives households greater opportunities to shape their financial future, it also makes understanding basic financial concepts, such as compound interest, inflation, risk and diversification, more important than ever. The latest Financial Literacy Report by Allianz Research suggests that the road ahead will be a long one as financial capability is not yet keeping pace.
- This is the fourth edition of our financial literacy survey, which is conducted every three years. This latest query involved more than 8,000 respondents from Austria, France, Germany, Italy, Poland, Spain, the UK and the US. The findings confirm that high financial literacy remains the exception. Only 17% of respondents qualify as highly financially literate, while more than one-quarter of them score low. The UK ranks highest on the share of highly financially literate respondents (23%), followed by Austria and Germany (both 22%), whereas France (11%) and the US (13%) record the weakest results. These findings are largely unchanged from 2023, underscoring the need to redouble efforts to improve financial acumen.
- Households do not necessarily need to save more; they need to invest smarter
- A simple simulation shows that shifting half of bank deposits in an average household portfolio, in equal parts, to national bonds and equities over the past two decades would have increased annual returns in every country. Without increasing the amount saved, such a reallocation would have lifted per capita financial wealth by 14–21% in real terms in countries with the highest deposit shares. Germany provides a clear example of the scale of the opportunity: the estimated per capita financial surplus over 20 years amounts to EUR11,700 after inflation.
- Those facing the greatest responsibility for financing their future are the least prepared
- Women, younger respondents and those with less education face the greatest financial challenges, yet score lowest on financial literacy. Women need to finance longer retirements and accumulate private wealth, but are only about half as likely as men to achieve high literacy (11% vs. 24%). Younger generations will also bear greater responsibility for privately funding their retirement, yet record the weakest results: only 12% of Gen Z score as highly literate, compared with 22% of Baby Boomers. Gen Z women record the weakest results, with only 10% ranking high, while Boomer men perform best, with 29% in the high-literacy category. Education is an even stronger predictor: just 5% of respondents with primary education achieve high literacy, compared with 24% of those with tertiary education.
- AI is lowering the barriers to financial advice without raising financial capability
- Already 14% identify AI as their main source of financial advice, rising to 26% among Gen Z, and almost half of respondents use AI at least weekly. Although AI reduces the cost of financial information and makes it more accessible, it cannot replace the financial literacy required to evaluate that information and make better financial decisions. Greater access does not automatically lead to better decisions. Even worse, AI users have greater confidence in their financial knowledge — 43% compared with 33% overall — yet are no more likely to achieve a high level of financial literacy than nonusers. AI can complement professional advice for financially literate households, but for the less informed it risks reinforcing poor financial decisions rather than improving them. AI is making financial information more accessible than ever before, but it cannot replace financial literacy. Critical thinking remains key to avoiding overconfidence bias. People need the knowledge to evaluate advice and the skills to make sound, long-term financial decisions.
- Closing the gap requires all hands on deck
- Closing the financial literacy gap requires coordinated action from governments, employers and financial institutions. Education must go beyond test scores to help households build confidence, recognize when professional advice is needed and make better long-term financial decisions. Governments should strengthen financial education and make retirement planning more tangible, employers should expand workplace financial guidance, and financial institutions should support households through simpler products, trusted advice and digital tools that help people move from saving to investing. Financial security is shaped by many forces, from individual choices to the financial and social systems people find themselves in. While the responsibility does not sit with households alone, people are being asked to take greater responsibility for their financial future and need the tools and knowledge to make informed decisions. Greater responsibility should come with greater financial capability. There is an ever-growing need for credible financial and risk education, that’s why Allianz is launching a free, online financial learning platform: Allianz’s School for Life.
Summary
FAQs
Most people don’t understand money as well as they need to. For the fourth time, Allianz surveyed over 8,000 people across eight countries and found that only 17% are highly financially literate, meaning they truly grasp concepts like compound interest, inflation, and risk diversification. One in four scored low. The UK, Austria, and Germany performed best, while the US and France came in last. Perhaps most concerning: despite individuals taking on more responsibility for their own retirement, which makes financial literacy more important than ever, these numbers have barely budged since the last survey in 2023.
The people who need financial knowledge most have the least of it. Women are only half as likely as men to score highly (11% vs. 24%), even though they typically live longer and need their savings to stretch further. Young people face a similar challenge: only 12% of Gen Z are highly literate, compared to 22% of Baby Boomers, but it’s the younger generation that will depend most heavily on private savings for retirement. The starkest gap? Education. Just 5% of those with only primary education score highly, versus 24% of university graduates.
Lower financial literacy comes with financial cost. More than half of people with low financial literacy can’t even name an investment product they’d consider. Meanwhile, Allianz calculated that simply moving half of typical bank deposits into a mix of bonds and stocks would have grown wealth by 14–21% over 20 years in countries where people hold the most cash. In Germany, that's an extra EUR 11,700 per person after inflation, without putting aside a single additional euro. It’s about investing smarter, not saving more.
AI is making financial guidance cheaper and easier to access, but the Allianz study finds that it’s not making people smarter about money. Nearly half of respondents use AI tools weekly, and among Gen Z, that share rises to 77%. The catch? People who use AI for financial advice feel significantly more confident about their knowledge, but they’re no more likely to actually be financially literate. That’s a potentially dangerous combination. For those who already understand finance, AI can be a helpful tool. For those who don’t, it risks reinforcing bad decisions with a false sense of certainty.
Closing the gap requires action from governments, employers, and financial institutions alike. Allianz outlines five priorities: First, make financial education a lifelong effort that starts in schools and continues through the workplace. Second, help people see the future impact of today’s choices through tools like pension dashboards. Third, make good decisions easier by simplifying products and using smart defaults like automatic enrollment. Fourth, teach people to use AI wisely – as a supplement to professional advice, not a replacement. And fifth, focus extra attention on those falling furthest behind: women, young adults, and people with less formal education.
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Authors
Simon Krause
Allianz Investment Management SE