Spain’s older generation: how do they do on financial literacy?
October 1st is Financial Education Day in Spain, an opportunity to acquaint people with the importance of being financially aware. This year it will be specially dedicated to the older generation, but what do we know about their level of financial literacy?
The recent Survey of Financial Competences, conducted jointly by the Banco de España and the Spanish National Securities Market Commission (CNMV) in Spain among a representative sample of adults (aged between 18 and 79), may cast some light on this matter if we consider the replies given by respondents aged 65 and over. In general, it may be said that the older generation’s financial literacy level is lower than that of the Spanish population overall.
Thus, for example, the Survey showed that the percentage of older people who understood concepts such as “inflation”, “compound interest” and “risk diversification” was lower than that for the total population, especially in the case of “compound interest” (36% of older people replied correctly to the question, compared with 46% of the population overall) and also, albeit to a lesser extent, in the case of “risk diversification” (42% compared with 49%).
By contrast, older people’s knowledge of “inflation” was very similar to that of the Spanish population overall (57% and 58%, respectively, replied correctly to the question), possibly because the older generation has personal experience of inflation, compared with younger generations that have not lived through and suffered the consequences of high-inflation episodes.
Also noteworthy is the high percentage of older people who responded “don’t know” to one or more of the three questions on “inflation”, “compound interest” and “risk diversification” compared with the population as a whole (49% vs 33%). The “don’t know” response was especially high among older women (61% with at least one “don’t know”, compared with 36% of men in the same age group and 40% of all Spanish women).
However, among the respondents aged 65 and over, the differences between the men and the women who gave correct replies to all three questions are quite similar to those observed for the population as a whole. Thus, for example, 19% of men aged 65 and over replied to all three questions correctly compared with 9% of women in the same age group, while in the 45 to 54 age group, 29% of men and 14% of women replied to all three questions correctly.
The over-65s make up a very important part of the Spanish population and it is crucial to understand their relationship with the financial markets. This is why this year’s Financial Education Day is dedicated to them, with various events to be held throughout the country (see: www.diadelaeducacionfinanciera.es).