12 of 16 countries record lower scores in MasterCard’s latest Financial Literacy Index

Ahead of #WEFEastAsia #MasterCard’s Financial Literacy Index reveals progress has stalled across #AsiaPacific http://news.mstr.cd/1FE4vEy

Singapore, 14 April 2015 – Ahead of the World Economic Forum on East Asia (19-21 April, Jakarta) MasterCard has revealed that progress towards improving basic finance knowledge and skills across Asia/Pacific has stalled as 12 of 16 countries record lower scores in the latest Financial Literacy Index.

Top findings:

  • Taiwan regains top spot followed by New Zealand (which drops from 1st place) and Hong Kong; Kiwis and Taiwanese over 30 years old the most financially literate in the region.
  • Singapore goes from 2nd to 6th place, with the biggest drop in score regionally.
  • While developed markets tend to rank higher than emerging, Japan remains the outlier staying in the bottom spot for the 3rd consecutive year.
  • Among the emerging markets, India advances the most, gaining 3 points to 62, placing it at 12th place in the region, and nearly at par with South Korea (62 points, rank 13 regionally).
  • China is top overall in ‘Investment Know-How’ but among the worst in ‘Basic Money Management.’
  • Asia/Pacific is a region of savers with the majority of people knowing how to ‘Budget’ and ‘Save Regularly.’ However, knowledge of ‘Retirement funds needed’ is low in both developed countries and emerging markets.
  • Knowledge of the risks associated with investment is poor across the region with the concepts of ‘Inflation’ and ‘Diversifying assets’ particularly badly understood, especially in emerging markets.
  • The financial literacy gender gap is higher in developed markets (excluding Taiwan) than emerging markets. The gender parity gap in South Korea is the widest, followed by Hong Kong and Australia.
  • In terms of age, people under 30 are less financially literate than those over 30 in all markets. With regards to employment status, with the exception of India and Bangladesh, people who are “Working” have superior financial literacy skills than those “Not Working.”
  • Aside from Taiwan and India, Vietnam and Indonesia are the only markets to improve their score in 2014 than 2013.

Index data on final page.

T.V. Seshadri, Group Executive, Global Products and Solutions, Asia Pacific said: “There is no one reason for the falling level of financial literacy across the region but the data clearly shows that the young and unemployed need additional support. Educating people so they can plan for the future is a crucial aspect of financial inclusion. In both developed and emerging markets, people are struggling to understand basic financial concepts such as inflation. In addition, while Asia Pacific is a region of savers, the lack of retirement planning should cause particular concern. It is not enough to provide access to financial services, we must ensure that everyone knows how to save, budget and invest so that their wellbeing can be secured over the long term.”

Issue specific insights

  • Taiwanese Financial Planning Savviness Shines – Results from recent research conducted by Manulife suggest that 7 out of 10 Taiwanese investors are not confident that their mandatory pensions will be sufficient to cover their retirement expenses. This lack of confidence and know-how may be prompting the Taiwanese to be active and prudent savers (score for both “Save Regularly” and “Emergency Savings” is very high at 95). In fact, data from Directorate General of Budget, Accounting and Statistics Taiwan (DGBAS) show personal savings in Taiwan to have increased by 9.96% (1424600 TWD Million to 1582300 TWD Million) from 2011 to 2012 .
  • Myanmar: Prudent Savings, Growth of Insurance Sector Earmarked to Accelerate – Myanmar continues to score consistently higher than most of its regional peers in the savings and insurance-related categories of Financial Planning with a score of 81, placing it in the top 3. This could be due to the lack of social security benefits in the country, which has in turn inculcated a practice of prudent savings for costly essentials like healthcare, education and emergencies. The results also show Myanmarese to have high regards for insurance. This trend is likely to remain strong, in view of the recent ending of the government-owned company Myanmar Insurance’s 60-year monopoly of the country’s private insurance industry. This milestone reform will not only allow private and foreign insurance companies to enter the market, but will be beneficial to Myanmarese consumers through heightened awareness of both life and general insurance concepts and products.
  • Japan’s lack of progress in Basic Money Management – Japan’s score has been steadily declining since the survey was first launched and the latest results indicate further deterioration in money management skills. This is likely attributed to the country’s aging population and stagnant income growth.  Currently the world’s oldest country, Japan’s aging population are now the biggest spenders of their savings and retirement funds. OECD figures show that compared to its G7 peers, Japan’s household savings rate is 0.6% of disposable household income, a stark contrast to other countries such as Australia (9.3%) and South Korea (5.3%).
  • Explaining the gender gap – Across the 16 regional markets, the gender disparity gap is most pronounced in the six developed markets (excluding Taiwan). In contrast, the difference in financial literacy scores is only slight in countries such as China, India, Indonesia, Malaysia, Vietnam and Bangladesh. The gender gap in developed markets could be due to the diminished amount of time afforded to day-to-day budgeting and tracking of expenditure with increased work responsibilities. The reason why women in emerging markets have more similar scores to men may be because financial systems are at infancy stage so women and men are more likely to be equally aware and informed. It may also be because income level is lower on average, making it necessary to be even more conscious of money and track expenditure on a regular basis.

Methodology

Conducted for the 4th time between July and August 2014 on 8,087 respondents aged 18-64 in 16 countries in Asia/Pacific (Australia, New Zealand, China, Hong Kong, Taiwan, Japan, Korea, Malaysia, Philippines, Thailand, Indonesia, Singapore, Vietnam, India, Bangladesh, and Myanmar) the Index comprises questions covering three components: Basic Money Management (50% weight) which examines respondents’ skills with regards to budgeting, savings, and responsibility of credit usage; Financial Planning (30% weight) which assesses knowledge about financial products, services, and concepts, and ability to plan for long-term financial needs; and Investment (20% weight) which determines respondents’ basic understanding of the various risks associated with investment, different investment products and skills required. A Financial Literacy Index Score for each market is calculated out of the weighted sum of the 3 components.

About MasterCard

MasterCard (NYSE: MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardAP and @MasterCardNews, join the discussion on the Beyond the Transaction Blog and subscribe for the latest news on the Engagement Bureau.

Media Contacts

Georgette Tan, MasterCard, georgette_tan@mastercard.com, +65 6390 5971
Samantha Yong, Weber Shandwick, samyong@webershandwick.com, +65 6825 8053

Index data

Country ranking and score

Rank Country Score
1 Taiwan 73
2 New Zealand 71
3 Hong Kong 70
4 Australia 69
5 Malaysia 69
6 Singapore 68
7 Thailand 67
8 Philippines 66
9 Myanmar 66
10 China 65
11 Vietnam 65
12 India 62
13 Korea 62
14 Indonesia 61
15 Bangladesh 60
16 Japan 55

Score breakdown by component

APAC TW NZ HK AU MY SG TH PH
Overall FinLit Score 65 73 71 70 69 69 68 67 66
Basic Money Management (Overall) 63 69 73 71 73 66 67 63 66
Budgeting ability 85 87 89 86 89 89 83 86 89
Keeping up with bills 62 65 74 72 73 61 68 66 64
Saving for big purchases 53 57 57 72 62 52 59 47 49
Tracking expenditure 68 66 77 55 75 70 68 74 88
Unsecured loans 45 72 71 74 68 56 60 41 38
Financial Planning (Overall) 75 84 73 72 68 20 77 79 73
FP is not only for the rich 74 87 81 63 74 80 75 75 83
Starting early with FP 78 96 86 60 82 84 87 63 54
Save regularly 90 95 91 90 89 93 91 87 98
Emergency savings 86 95 84 84 79 91 89 86 91
Insurance is important 76 89 63 82 54 82 79 86 77
Retirement funds needed 46 41 30 53 30 47 40 77 35
Investment (Overall) 58 66 62 65 60 62 57 60 56
Financial statements understanding 68 63 77 84 75 75 64 74 58
Financial products suitability 74 83 80 75 73 83 70 84 89
Investment monitoring 66 78 56 77 55 69 55 73 81
Concept of diversification 40 40 47 36 48 39 47 41 22
Concept of inflation 43 65 51 53 50 41 48 29 28

 

MM CN VT IN KR ID BD JP
Overall FinLit Score 66 65 65 62 62 61 60 55
Basic Money Management (Overall) 57 58 59 56 57 59 54 55
Budgeting ability 90 95 82 93 71 89 93 51
Keeping up with bills 36 55 64 45 73 63 55 65
Saving for big purchases 50 46 60 39 34 60 43 59
Tracking expenditure 51 59 73 81 72 46 71 57
Unsecured loans 35 18 22 35 36 11 45
Financial Planning (Overall) 81 76 81 74 78 70 69 64
FP is not only for the rich 80 71 87 62 72 71 65 55
Starting early with FP 85 88 89 58 90 90 55 75
Save regularly 97 89 96 87 92 81 90 81
Emergency savings 97 84 90 83 88 74 79 79
Insurance is important 82 80 74 82 85 62 76 66
Retirement funds needed 44 43 53 74 39 42 51 31
Investment (Overall) 68 53 59 49 55 58 41
Financial statements understanding 77 61 91 51 79 66 26
Financial products suitability 86 76 71 65 73 50 45
Investment monitoring 82 66 83 61 48 73 40
Concept of diversification 41 28 28 39 39 55 49
Concept of inflation 55 36 23 32 36 46 47