Financial Knowledge in Europe: Women Lag Men in their financial Literacy

This paper examines the level of financial literacy across the 27 EU member states, using data from the 2023 Flash Eurobarometer 525 survey. The results are not great.

The state of financial knowledge in the European Union: a new survey

• Maria Demertzis, Juan Mejino-López and Luca Léry Moffat
• Journal of Financial Literacy and Wellbeing, 2024
• A version of this paper can be found here
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What are the Research Questions?

The main research questions addressed in this paper can be summarized as follows:

1. What is the current level of financial literacy across the 27 EU member states?
2. How does financial literacy vary across different EU countries, and what patterns or trends can be observed?
3. What is the relationship between financial literacy and financial outcomes among EU citizens?

What are the Academic Insights?

By analyzing data from the Flash Eurobarometer 525 survey, a comprehensive dataset collected to assess financial literacy across the 27 EU member states (EU-27), the authors find:

1. Financial literacy levels vary significantly across the 27 EU countries. On average, only 18% of EU respondents score highly on financial literacy, with scores of 9 or 10 on a scale of 0 to 10, while the majority (64%) have a medium level, and 18% have a low level. There are notable differences between countries: higher proportions of high financial literacy scores appear in Denmark, Slovenia, and Sweden, where around 27-28% of respondents achieve top scores. In contrast, Portugal and Latvia report lower high-literacy rates, with only about 11% scoring in the high range. Certain concepts are widely understood across the EU. For instance, about 65% of respondents correctly answered questions on inflation and the relationship between risk and return, likely due to increased exposure to these concepts amid recent economic fluctuations. However, only 20% of respondents correctly understood the relationship between interest rates and bond prices, an advanced topic indicating a gap in comprehensive financial knowledge across member states.
2. Across all EU countries, men consistently show higher financial literacy levels than women, with an average gender gap of 18 percentage points. This gap remains even when the “I don’t know” response option is removed, suggesting confidence differences as well as knowledge gaps. The disparity is most pronounced in some countries where the gap exceeds 20 percentage points, although Romania presents a smaller gender gap of less than 10 points. Financial literacy generally increases with age. Those aged 55 and older tend to score significantly higher than younger adults (ages 18-24), with notable age gaps in Denmark and Austria, where older adults outperform younger adults by more than 30 percentage points. This trend likely reflects both experience and greater familiarity with financial decision-making over time. Higher income levels are positively correlated with financial literacy across the EU. For example, in countries like Cyprus, Malta, and Lithuania, financial knowledge scores in the top income quintile are over 50 percentage points higher than those in the lowest quintile. This trend reflects access disparities in financial education and resources. Education level also shows a strong correlation with financial literacy: people with higher education levels perform better on financial literacy questions across all EU member states. Austria displays one of the widest gaps, around 50 percentage points, while Spain shows a smaller gap of under 10 points.
3. The European Commission’s 2023 survey highlights a clear relationship between financial literacy and financial outcomes for EU citizens, particularly concerning financial resilience and retirement preparedness.

Why does this study matter?

These findings are relevant for both academic research and policymaking, highlighting the need for targeted financial education policies. Enhancing financial literacy could help reduce financial fragility across the EU population, particularly among those less financially knowledgeable. Additionally, boosting financial knowledge may encourage proactive retirement planning, improving the long-term financial security of EU citizens.

The Most Important Chart from the Paper:

Abstract

For the very first time, in the Spring of 2023, the European Commission (EC) carried out a survey across all member states to assess their level of financial literacy. This survey complements other national surveys and fills an important gap because it provides a consistent metric that allows comparisons among the European Union (EU) countries. The motivation behind the EC’s survey stems from the need to advance the state of financial literacy to safeguard financial stability and promote important projects, such as the creation of a Capital Markets Union. In this paper, we analyze these new data and confirm findings in the literature about the importance of being financially knowledgeable to achieve good financial outcomes. Unfortunately, the survey also confirms that barely one in two individuals, on average in the EU, is financially literate.