While the United States is one of the richest countries in the world, it doesn’t necessarily mean that its residents are financially savvy. A recent study showed that the U.S. ranked 14th in the world for financial literacy. Only 57% of adults in America are considered financially literate, which is considerably lower than the top three countries. An astounding 71% of adults in Denmark, Norway and Sweden are financially literate.
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So, what is financial literacy, and why does it matter? At GOBankingRates, we have delved into the importance of financial literacy and how it can affect you throughout your lifetime. We explore why the U.S. fails to rank in the top 10 despite being one of the richest countries in the world.
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What Is Financial Literacy?
As reported by Zippia, financial literacy is “knowing the skills and behaviors needed to make informed decisions with money.” It is a critical tool that can help ensure financial stability throughout one’s lifetime.
As explained by World Excellence, financial literacy involves a wide range of skills, including the ability to save and budget, an understanding of investing and debt management, and how to set and achieve financial goals.
The US Ranking for Financial Literacy
Per Zippia, “The US ranks 14th in financial literacy. While this isn’t the worst score in the world, it is concerning when you consider the fact that the US is the richest country on Earth.”
Statistics show that only 57% of adults in America are considered financially literate.
Unfortunately, America’s financial illiteracy is costly. It is believed that an average of $1,819 is lost annually by adults who are not financially literate in the U.S. When broken down by generation, the numbers are even more grim.
Zippia notes that “[o]nly 36% of Gen Z are financially literate.” Older generations fare better, with 48% of Gen Xers and millennials considered financially literate and 59% of baby boomers.
The disparity in financial literacy between men and women is also concerning. “Women are 40% more likely to have low levels of financial literacy.”
Financial literacy rates across the board have dwindled in the past decade.
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Who Ranks the Highest for Financial Literacy?
Denmark, Sweden and Norway top the financial literacy rankings. Over 70% of adults in each of these countries are considered financially literate. A common thread among each of these nations is a focus on financial education.
Which Countries Are the World’s Richest?
The United States and China regularly rank among the world’s richest countries, according to Global Citizen Solutions. This ranking, however, is based on net worth. When other considerations are factored in, the U.S. tends to fall out of its leading position. For instance, Switzerland is the wealthiest country in the world per capita, and Luxembourg tops the list of world’s wealthiest countries by GDP (gross domestic product).
How Many People Are Considered Financially Literate Around the World?
Billions of people across the globe lack the financial literacy skills that experts consider critical. It is estimated only around one-third (33%) of adults are financially literate worldwide. This means that many individuals do not have a basic understanding of budgeting, saving, investing and more.
Why Does Financial Literacy Matter?
Financial education is frequently overlooked, particularly in countries like the United States. For decades, money was considered a taboo subject that shouldn’t be discussed at the dinner table. Unfortunately, this hesitancy to discuss finances meant that many people entered adulthood woefully unprepared to weather financial hardships. A reliance on credit cards and little understanding of investing magnified the problem.
Financial literacy is considered essential by most money experts. A firm understanding of how to save and budget is often believed to be critical to financial stability. Countries that have the highest rates of financial literacy usually teach these skills throughout a child’s education, ensuring they enter adulthood with the information they need to enjoy financial stability.
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This article originally appeared on GOBankingRates.com: World’s Richest: Guess Where the US Ranks Among the Top 20 for Financial Literacy?
