Executive Summary

There is a persistent financial literacy gender gap. Out of the nine questions we asked to assess the level of financial literacy, the mean number of correct responses from women was 3.7 (median 4), while that of men was 4.5 (median 5). Consequently, there is a much higher proportion of women among the respondents with low financial literacy, i.e. with only 0-2 correct answers (30% vs 21%), and a much lower share in the high financial literacy category, i.e. with 7-9 correct answers (11% vs 19%). Many women play the financial game with a squared ball.

However, there is one country in our sample with a “positive” gender gap, i.e. a higher proportion of women (22%) than men (10%) in the high financially literate category: Germany. There might be a cultural role at play here: A larger share of women in Germany reported being the sole financial decision-maker in their household, which could boost the level of financial literacy.

But the gender gap is not the only sobering result. Overall, only 10% (France and the US) to 18% (Italy) of all respondents have high levels of financial literacy. In all countries, the share of respondents with low financial literacy is significantly higher, ranging from 20% (Spain) to 32% (the US).

Consistent with our previous work on financial literacy, we find that it does increase with age. There was a higher concentration of high financial literacy amongst the older generations (Baby Boomers: 21%) compared to the rest (average 15%), and in particular compared to the younger generations of Gen-Z (6%) and Millennials (11%).

What do different generations consider among the top criteria for long-term investment? Against expectations, only 10% of the total sample considered ESG (environmental, social and governance) responsibility, although multiple answers were allowed. Even more surprising: there was almost absolute homogeneity in the sample across ages for the disregard of ESG.

To gauge the financial benefits of being financial literate, we constructed ideal typical portfolios by level of financial literacy and calculated past real returns for each country studied. The results are straightforward: Average annual returns for the last 20 years increase with the level of financial literacy. However, the difference in returns between average and high financial literacy is only marginal. The portfolios of these two investor types are already largely similar. This suggests that it is not necessary to become a proven financial expert to achieve good financial results; average financial knowledge is sufficient.

On the other hand, the difference in annual average returns between low and average financial literacy is considerably higher, ranging from 0.8% in the US to 1.5% in Spain. The decisive step is the one from financial illiteracy to basic knowledge and understanding.

How do these differences in returns translate into euros? Based on the amount of financial assets owned by the average household in the respective country, the annual surplus investment income per household ranges from EUR 1,750 (average financial literacy investor in Spain) to EUR 5,000 (high financial literacy investor in Australia). Over long investment periods – as is common in old-age provision – financial illiteracy costs a fortune, literally.

To increase financial literacy, boosting confidence is as important as – or even more than – numeracy skills. Because of this attitude response of financial literacy, people (in contrast to AI) play an important role in overcoming financial inactivity and taking decisions. That is why we at Allianz have consciously decided to put “real” coaches at the center of our various financial literacy offers – be it the Squared Ball campaign for young female athletes or the Financial Workout for high-school students. In the end, the interpersonal aspect is the critical success factor for boosting financial literacy.

Concretely, a successful financial literacy intervention, in particular those catering to women, should include a four-cornerstone approach to smooth the squared ball and level the playing field. First, it should tackle confidence and the paralyzing effect of not feeling knowledgeable when it comes to finance. Second, it should empower women to discuss any financial struggles openly without any shame factor, enabling them to come up with a plan to reach financial goal. Third, it should provide actionable steps towards building a savings fund for a rainy day or building a fund for investment. Lastly, it should enable women to understand the risks and return trade-off of the different financial assets available for investment and help them decide what is best for their life plan. In other words: Confidence. Budgeting. Saving. Investing.

Ludovic Subran

Allianz SE

Jordi Basco-Carrera

Allianz SE

Patricia Pelayo-Romero

Allianz SE

Arne Holzhausen

Allianz SE