Financial literacy is possibly the most important set of information in the modern world. This simple topic divides the haves and have nots in intersectional ways related to culture, gender, age, geographic location and more.

In America alone,

“Over 53% of adults say thinking about their financial situation makes them anxious. 44% say discussing their finances is stressful.”

We have a major consumer debt problem, which primarily fit into these 4 categories: student loan debt, credit card debt, mortgage debt and auto debt. Assuming that financial freedom is a common goal, Americans are not doing as well as they could be.
The decisions that we are expected to make in our lifetimes should be accompanied by the resources that are needed to make them. Countless young Americans take out student loans when they are just out of high school without the full understanding of the commitment that those decisions take and the potential decades that might be required to pay them off. For some, this leads to a rabbit hole of other financial missteps that negatively affects other aspects of their lives.

America’s Approach

Financial literacy programs vary state-by-state and can be seen in different forms across the world. In America, only 25 states have state-regulated economics courses that are required to graduate high school, and only 6 require a personal finance class to be taken to graduate. Students who take these courses are found to handle college and credit card debt more responsibly. Experts believe that the skills students learn in these courses produce tremendous results.

The map below shows the percentage of adults that are considered “financially literate” in each part of the world. These results are based on a study that considers the financially literate to be those who have a basic understanding of 4 key concepts: basic numeracy (interest), compounding interest, inflation, and risk diversification. Though this gives a rough picture of each country’s literacy rates, it does not take into account external factors such as cost of healthcare, education, basic needs, cultural differences, and so on. Although America looks like we’re in a good place, only about 57% of adults are savvy in these basic topics.


Top Performing Countries

Norway, Denmark, and the Netherlands have some of the highest financial literacy rates in the world, all averaging around 70% according to the study. These countries have a very different education funding model than the US and their spending on education is some of the highest in the world.

In Norway, financial institutions are encouraged to educate their young population in school to give them a leg up in the future. There are several programs funded by the national bank to create interactive learning materials for students about personal finance topics. The goal in mind with these programs is to give the students a strong foundation in personal finance with the long-term goal of helping them buy homes in the future.

The Dutch government puts a strong emphasis on empowering consumers with knowledge. Many of the legislative actions they take are intended to make consumers more informed about their decisions. One of the actions they took in 2012 to combat consumer debt was to give all potential borrowers an interactive credit guide and budget calculators when they initially take out credit cards/loans.

In Denmark, things get really interesting. While they do have a high consumer debt percentage, households have large assets. Pension plans of around 10-15% of your income are typically mandatory for Danish employees and continue to compound even during retirement. This model doesn’t have as much emphasis on learning at a young age but still prepares adults for financial stability.

The Criticism Against Financial Literacy Education in the US

Some critics of financial education materials believe that making consumers over-confident in their financial decisions will result in consumers making foolish mistakes. Although this is a valid argument, it also could speak to how financial education can be improved in a way that educates consumers enough to know what advice to take and when to seek professional help.

If this argument were taken to other aspects of knowledge, it would not be sound. For example, most high school students take some sort of health education class in school. They might learn the basics about their body and some illnesses they might have in the future, but this does not lead to a level of over-confidence that increases their likelihood to make foolish health decisions. The classes are set up in an informative way to teach students that there are experts in medicine who should be consulted with more complex topics.

Final Thoughts

After researching various countries’ and their financial education models, one thing is inherently clear: it’s simple. The countries that have the highest financial literacy rates are ones that hone in on the basics: how to responsibly manage credit cards, how to budget, and so on. That information is conveyed to consumers at a young age. This allows the population to have a strong foundational knowledge early in life and makes further learning about finances less intimidating. Coincidentally, the specific countries listed are considered to be some of the happiest countries in the world.

Each country has their own cultural norms and costs of living. However, it can be very insightful to look at other countries for perspective on how you can manage your finances and to evaluate how you can spend your money more effectively.

As technology advances, it is likely that consumers will gain a better understanding of their finances. With Facebook groups, reddit forums and other media sources giving consumers insight into the financial market, information is easier to get than ever. Free credit reports, online educational resources and the ability to compare rates/prices puts power into the hands of consumers.

If you are new to finances, try going back to the basics. Understand your bank statement through and through and make a budget that you are happy with. Once you have those understandings, branch out to more complex topics like retirement, emergency funds or making investment purchases. It is never too early to plan your financial future, and it is also never too late to get started.