Low financial literacy could be costing the average household from EUR 1,750 in Spain to EUR 4,740 in the USA every year, according to a new study by Allianz. Over a ten year period, this could amount to between EUR 22,500 Euro (Spain) and EUR 79,300 (USA) compared to households lead by people who really understand financial basics. The study surveyed more than 1,000 people each in the United States of America, United Kingdom, France, Spain, Italy, Germany and Australia, asking them a series of questions designed to test their understanding of financial basics, such as interest rates, inflation, and investment risks and returns.
Worryingly, the results reveal that more than a quarter or 26% of respondents lack the knowledge and skills to make sound financial decisions – what Allianz classes as 'low financial literacy'. Meanwhile 60% are averagely financial literate and only 15% demonstrate high financial literacy. This is roughly similar to all countries surveyed. Interestingly, two-thirds (66%) of all people polled worry that they know less than the average investor about financial markets and investing.
But what kind of money could a broader financial knowledge actually add to a households’ budget? Based on the amount of financial assets owned by the average household, Allianz calculates that the difference in income from any kind of investment can quite dramatically differ between people with low, average and high financial literacy. A person with high financial literacy can expect to earn an extra between EUR 1,910 (in Spain) and EUR 5,000 (in the USA).