Americans Rank Last in Global Financial Literacy, Allianz Finds

When it comes to financial fluency, Americans might need to go back to school.

That’s the unstated recommendation from Allianz Research’s new global survey of financial literacy that gave Americans a failing grade for their lack of knowledge of basic concepts such as compound interest and inflation.

In fact, after questioning more than 8,000 adults across the U.S., U.K., Germany, France, Austria, Italy, Poland and Spain for the fourth edition of its financial literacy study, Allianz found that while financial literacy across the globe remains “worryingly low,” the U.S was the least financially literate of the eight developed countries polled. The web-based survey was conducted between April and May.

One-third of Americans demonstrate a low level of financial literacy, the largest share of any country surveyed, while only 13% of U.S. respondents scored in the highest literacy category, dropping the country at the bottom, according to the study, Financial Literacy Pays: Smarter Investing Goes Beyond AI.

Still, the rest of the globe aren’t Einsteins either when it comes to money smarts. Only 17% of the respondents in the countries surveyed scored as highly financially literate, little change from the last survey in 2023, the firm said. The U.K. graded the highest, at 23%.

“Financial literacy is an important foundation for building, protecting and growing wealth over a lifetime, but it remains the exception,” lead researcher Ludovic Subran, chief investment officer and chief economist for Allianz, said in the report.

Arguing that the responsibility for building wealth and financing retirement is increasingly shifting from institutions to individuals, the researchers added, “As financial products become more complex and private provision more important, understanding basic financial concepts such as compound interest, inflation, risk and diversification is more important than ever. Yet financial capability is failing to keep pace.”

Americans Are Big On Wanting To Save

Despite flunking financial literacy, the U.S. is the only country where the largest share of respondents say they plan to save more, Allianz said, with Generation Z respondents leading the charge, at 60%, followed by millennials, at 51%.

In further takeaways from polling Americans, Allianz found little generational difference in U.S. financial literacy. Despite growing up with investing apps and other digital access to finance, younger Americans aren’t significantly more literate than Baby Boomers.

However, the survey found a persistent gender gap across every generation, with men nearly twice as likely as women to demonstrate high financial literacy.

“Women, younger respondents and those less educated face the greatest financial challenges but score lowest on financial literacy – a pattern that is remarkably consistent across countries,” Subran wrote.

While Americans are big on savings, Allianz said the key takeaway from the findings is that putting money in savings accounts, for example, isn’t the best path to create wealth. Sound investing is and that comes from improving financial literacy, according to Allianz.

“Smarter investing, not higher saving, is one of the largest untapped sources of household wealth,” Subran said in the report.

Understanding Inflation is Key

Allianz explains that financial literacy isn’t only about understanding financial concepts but also realizing how those concepts impact everyday decisions and overall financial life. One of the most important concepts to understand clearly is inflation, the firm said.

“Households that overestimate inflation underestimate the real return on their savings and may conclude they have too little left to invest, reinforcing the already existing cost-of-living pressures,” Subran wrote.

Yet, Allianz found that only a “sobering” 28.0% of individuals polled across the globe estimated inflation correctly, with 48.7% overestimated it and 23.3% underestimating.

Almost 60% of American respondents overestimated the inflation rate, putting the country third behind Italy and France.

AI Builds Confidence – Not Capability

Across the developed countries polled, artificial intelligence is the go-to tech tool for many to access financial advice. But Allianz said that, while the use of AI might increase confidence, it doesn’t translate into the financial smarts necessary to make sensible investment decisions.

Almost half of the respondents, or 48%, use AI at least twice weekly, while in the U.S. 22% of individuals cite AI as one of their primary sources of financial advice, surpassing the international average, according to Allianz.

The Allianz researchers call for a “new playbook” to close the global literacy gap that would require the buy-in of government, employers and financial institutions.

Governments, the researchers argue, should embed financial education in schools and adult learning. For their part, Americans do agree that financial literacy skills are essential to adulthood. Ninety percent of Americans surveyed by WalletHub say budgeting should be taught in school.

Employers can strengthen financial capability through workplace education and pension guidance, according to Allianz, and financial institutions should provide “simpler products, higher advice standards, digital tools and AI-enabled guidance that helps households move from saving to long-term investing.”