EU citizens are not doing well when it comes to financial literacy. Nearly half lack an understanding of basic financial concepts, including inflation.
A third of Europeans do not understand how inflation works, according to a survey by Eurobarometer. The same survey revealed only 18% of EU citizens were able to show a high level of financial literary.
According to the survey, 65% of EU citizens are aware that, in times of positive inflation, the purchasing power of their money decreases, meaning they can buy less than they could before with the same amount of money.
Lack of knowledge about inflation could be seen as concerning
In October 2022, the annual inflation in the EU reached levels not seen before in the previous four decades at 11.5%. While the rising cost of living was the most pressing worry for 93% of Europeans at that time, apparently a third of EU citizens do not know how inflation affects their lives.
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The best performers were the Netherlands (43%), Denmark (40%), Finland (40%) and Estonia (39%) where about four in 10 respondents display a high level of financial knowledge.
Romania and Portugal reported the worst scores in high levels of financial knowledge at 13% and 16%, respectively.
I think some of the questions there are trivial. I don’t think all of them are. Take the third question. I don’t think it’s a trivial question and I don’t think that not knowing that bond prices drop when inflation rises is something that shows financial illiteracy. It’s not really something most people have to worry about in the first place in terms of something within their control.
Yeah, the bond question doesn’t seem relevant to most people (unless they’re building a trading portfolio), but the questions on inflation and buying power shrinking over time are extremely important.