In a study called “Measuring Financial Literacy: Results of the Organization for Economic Co-operation & Development (OECD) International Network on Financial Education (INFE) Pilot Study,” it was noted that 97 percent of the Malaysian participants were actively saving in the past 12 months. Malaysia and 13 other countries participated in this study. Some of the other countries were the United Kingdom, Albania, South Africa, Germany, Poland, Norway and the British Virgin Islands.
In this study, around 1046 people, 18 years old and above participated in a face-to-face interview in Malaysia. The study which ended in early 2011, started in the second-half of 2010. A questionnaire, “OECD INFE Core Questionnaire” was used to determine a person’s financial literacy that covered three elements namely financial knowledge, financial behavior and financial attitude. The same questionnaire was used by the other 13 countries in this study. All the respondents were tested on their knowledge of financial concepts and in applying their numeracy skills.
One of the core question was “In the past 12 months, have you been saving money in any of the following ways?” These include putting aside money at home, in saving accounts, in investment accounts or through saving clubs. The highest result was reported by three countries namely Malaysia, Germany and the British Virgin Islands where more than 80 percent of the respondents were active in saving money.
When it came to managing money responsibly and having a budget, Malaysia had the highest percentage at 74 percent. This relates to the handling of household finances and budgeting. It was also observed that there is a positive relationship between financial knowledge and financial behavior. Examples of good or positive financial behaviors are giving some thoughts before buying something, having a budget, saving money and paying the bills consistently. The following countries showed higher financial behavior results compared to the rest
Education plays an important role as analysis of every country showed that
• High financial literacy scores came with increased levels of education
• Individuals with higher education are more likely to practice good or positive financial behaviors and attitudes. In addition, they also tend to possess more advanced knowledge in the area.
Another conclusion from the study showed that financial literacy varies with age and income. Middle age people tend to have a higher level of financial literacy as reflected in most of the 14 countries. The youngest and oldest respondents gave lower scores. What about income level? If you guessed that a higher income correlates to higher financial know-how, then you are right. Participants with higher incomes tend to score higher in financial knowledge compared to those earning lower incomes.
Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.