A comprehensive study by Allianz across 10 countries in Europe shows little improvement in awareness of financial concepts among Europeans, nearly a decade after the global financial crisis. In the study - titled “When Will the Penny Drop: Money, Financial Literacy and Risk in the Digital Age” - Austria, Germany and Switzerland topped the ranking in financial and risk literacy while France, Portugal and Italy were the worst performers.
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Financial and risk literacy across Europe
The least understood was risk diversification. Few of us seem to extend the proverb - ‘Don’t put all your eggs in one basket’ – to financial decisions. Only 28 percent of the respondents across Europe could identify the most suitable financial product in a real-life saving scenario based on risk diversification.
“Diversification is important in today’s low-yield environment,” says Ingo Mainert, Chief Investment Officer (Multi Asset Europe) at Allianz Global Investors. “Positive future saving outcomes depend upon people being capable of making investment decision that involve risk and understanding that, ultimately, risk can benefit them in the long term.”
Given increased longevity, the possibility of individuals outliving their savings was the easiest risk decision to deal with. Here, elderly respondents performed better than younger ones.
Overall, women still lagged men in terms of financial literacy, particularly in risk-related questions, while millennials (those under the age of 35) were found to have the lowest financial and risk literacy, though this could change later in life.
“It is unsettling to see no improvement in these groups as they will have to bear more responsibility for and need to be more active in their financial and retirement planning than previous generations,” says Brigitte Miksa, the head of Allianz International Pensions. “It is also a concern that the groups more likely to perceive professional financial advice as useless are those that would benefit most from it.”
According to the survey, Germany ranks second after Austria in terms of financial and risk literacy. Around 63 percent of German respondents answered all basic financial literacy questions correctly. As for risk questions, 19 percent of German and Austrian respondents got the answers right – the highest result.
It is disturbing that only one person in five in Germany was able to answer all the risk questions correctly. This was reflected in the three scenarios where only 13 percent were able to match the correct solution to a financial challenge. More than 17 percent were unable to even correctly answer one of the scenarios.
Allianz conducted the survey in November 2016, interviewing 1,000 people each in Austria, Belgium, France, Germany, Italy, the Netherlands, Portugal, Spain, Switzerland and the United Kingdom.
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