Financial literacy means the knowledge and skills needed to make important financial decisions. Every day, thousands of people are deciding where to open a bank account, which mortgage to choose, where to invest their money and how to save for retirement.
However, according to the OECD/INFE 2020 international survey of adult financial literacy, about half of the EU adult population does not have a good enough understanding of basic financial concepts. While the overall figures are low, the problem is more acute in some parts of society than others, with the most vulnerable disproportionally affected. Low-income groups, for instance, as well as women, young people and older people, tend to score lower than the rest of the population when it comes to financial knowledge.
Everyone should be able to understand the risks involved when borrowing or investing money. Financial literacy can help individuals plan for the future, make better decisions about what to do with their money, and invest in capital markets in a way that meets their needs. This will be even more important for individuals and businesses as the economy gradually recovers from the COVID crisis.
Financial literacy also protects individuals from over-indebtedness, excessive risk-taking, fraud, or cyber risks. Financial education complements consumer protection, but does not replace it.
What is the European Commission doing about this?
In its September 2020 capital markets union action plan, the Commission reaffirmed that sound financial literacy is at the heart of people’s financial well-being. The Commission and the OECD are working together to develop joint ‘financial competence frameworks’ for adults and for children. These frameworks will set out the knowledge, skills and behaviour that someone needs to develop to ensure their financial well-being throughout their life. They can be used by national public authorities and stakeholders to develop policies, programmes, and learning materials on financial literacy
The Commission and the OECD jointly developed a financial competence framework for adultsin January 2022. They are now working on promoting the framework and helping Member States and stakeholders use the framework in concrete policies and initiatives, through targeted workshops. In addition, the Commission and the OECD on financial competence framework for children and teenagers.
The Commission also works with national administrations to assess levels of financial literacy and create dedicated programmes to improve financial education.
Videos on financial literacy
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How financially literate are European citizens?
The results of a Eurobarometer survey on financial literacy published in July 2023 by the European Commission show that only 18% of EU citizens have a high level of financial literacy, 64% - a medium level, and the remaining 18% - a low level. There are, however, wide differences across Member States. In only four Member States, more than 25% of people score highly in financial literacy (the Netherlands, Sweden, Denmark and Slovenia).
The results also point to the need for financial education to target particular groups including women, younger people, people with lower incomes and those with lower levels of education who tend to be on average less financially literate than other groups.
Speeches by Commissioner McGuinness on financial literacy
Financial literacy is a political priority for Commissioner Mairead McGuinness. Discover more about her vision of a financially literate EU population and the wider future of financial services in these speeches:
- Chapter 3 ‘Financial literacy in the EU: Trends, relevance and policy contribution’ in the European Financial Stabillty and Integration Review 2023
- Financial competence framework for adults in the EU
- ESAs draw consumers’ attention to how rises in inflation and interest rates might affect their finances (May 2023)
- Launch event of the Financial competence framework for adults in the EU (January 2022)
- Op-ed by Commissioner McGuinness: Improving financial literacy must be a priority for Europe, Financial Times (January 2022)
- Webinar on financial education in the digital era (June 2021)
- Finance Newsletter article on financial literacy (May 2021)
- Development of a financial competence framework in the EU
- Consumer rights and financial literacy
- Commission support to Member States on financial literacy
- Commission project: Protecting consumers and enhancing financial literacy in Italy
- EBA webpage on financial education
- EIOPA financial education map
- OECD International Network on Financial Education - OECD/INFE