Asians more financially literate than Europeans and Americans

The survey reveals the more people are financially literate, the more they experience feelings of happiness while the less literate tend to have feelings of fear.

Results from a global ING survey suggest that 90% of consumers around the world aspire to be better at managing their money but don’t know where to start or obtain needed information. On average, the Asian countries surveyed are the most financially literate with Japan, Korea and India ranking as the top three out of ten countries where the survey was conducted. However, the variation of their comfort level in financial management may be related to cultural differences.

ING’s recent survey was in the form of a Financial Intelligence “FQ” test to measure the financial literacy of consumers and how this influences their attitude, behaviour and emotional well-being.

More than 5,000 respondents across ten countries in Europe, US, Latin America and Asia participated in this online survey conducted in November 2010 with a sample size of 500 in each country.

Based on the survey, consumers were classed within one of four financial literacy profiles: excellent, good, basic or poor. The results indicate the following:

• 63% of the global population has a basic knowledge of finance (“basic profile”). The majority of this group struggles with putting financial fundamentals into practice such as saving for retirement or an emergency fund.
• Less than 60% of the participants as a whole save for retirement, but results vary by country.
• Only 44% of the respondents in Spain save for retirement versus 79% in India – the sizeable discrepancy suggesting a large cultural difference.
• Japan (44%), India (40%) and Korea (37%) are the top three with good to excellent financial knowledge, whilerespondents from Romania (23%) and Mexico (19%) demonstrated the lowest financial literacy.

ING’s survey also shows a correlation between a person’s financial literacy and his or her emotional well-being.

The more people are financially literate, the more they experience feelings of happiness while the less literate tend to have feelings of fear. When asked about their feelings towards debts, strong negative emotions such as fear, guilt and shame are mostly felt. The top three items consumers curtail spending on when in financial need are going out for dinner, luxury purchases and energy.

Moreover, cultural aspects have a significant effect on overall financial attitude and motivation. Two of the countries where the population are most financially literate – Japan and India, are completely opposite in expectations of wealth for the future. Indians are most optimistic about the next generation having more wealth while Japanese have the lowest expectations.

Despite Asians’ higher financial literacy compared with Americans and Europeans, when asked about their perception towards money, Japanese (21%) and Koreans (18%), both cultures where modesty is important, are very modest about their own financial skills. Indians (39%) are most confident. The influence of culture is also observed as most Japanese feel uncomfortable among all countries surveyed when thinking about long term financial future while only 15% of both Koreans and Indians think this way.

Nevertheless, none of the countries that participated in this survey have more than half of the respondents thinking they are confidently in control of their finances. What is particularly alarming is that a third of the consumers surveyed worldwide have not set aside any emergency funds, while only 22% have savings to cover three to six months expenses. Among the countries surveyed, the US has the lowest savings rate, with 48% of respondents having no emergency funds in reserve, while Japanese have the highest saving rate, with 45% reserving savings for expenses to cover anywhere from six months to more than a year.

Edmund Lacis, Head of Business Development from ING Investment Management Asia Pacific said “It is encouraging to see consumers in the Asian region wanting to improve their financial management skills. Providing easy access to resources and giving more insights in money management are essential steps to empower consumers to manage a better financial future.”

Asian consumers are by far the most literate and are also more eager to learn more. And for people whose New Years’ resolutions also include becoming better at managing their money, the ‘secrets of success’ of people with a high FQ are to actively keep track of their budgets, to be disciplined in staying within budget and to conduct appropriate research before making financial decisions.