EU Struggles with Basic Financial Knowledge
European citizens face significant challenges in financial literacy, with nearly half lacking an understanding of essential financial concepts, including inflation. According to a Eurobarometer survey, one-third of Europeans do not comprehend how inflation works, and only 18% demonstrated a high level of financial literacy.
The survey revealed that 65% of EU citizens are aware that positive inflation decreases their purchasing power, meaning they can buy less with the same amount of money. In October 2022, EU annual inflation hit a four-decade high of 11.5%, yet many Europeans still struggle to grasp its impact on their lives.
Survey Highlights Financial Knowledge Gaps
The Eurobarometer survey, conducted in March-April 2023, tested financial knowledge and behavior across EU countries. Only 26% of respondents answered at least four out of five financial questions correctly, while half managed to answer only two or three correctly. The highest performers were the Netherlands (43%), Denmark (40%), Finland (40%), and Estonia (39%), whereas Romania and Portugal had the lowest scores at 13% and 16%, respectively.
Among the EU’s major economies, Germany scored above average, while France and Italy were slightly below, and Spain lagged significantly at 19%. The lowest scores were observed in Cyprus and Romania (both 30%), followed by Greece (29%) and Portugal (28%).
Financial Literacy by Socio-Demographic Factors
The survey also examined financial literacy across different demographics. Men (24%) scored higher than women (13%), and those over 39 years old (20%) performed better than younger age groups. Education level also played a significant role, with 26% of highly educated respondents scoring well compared to 16% with medium education and 12% with low education.
Despite some countries showing strong financial knowledge, others like Finland had low financial behavior scores, affecting overall literacy. Only 16% of Finns agreed they track expenses, significantly lower than the EU average of 49%.
The EU is committed to improving financial literacy, aiming to equip citizens with the knowledge and skills necessary for sound financial decision-making.