Is financial literacy a question of gender and age?

The True Wealth Financial Literacy Index reveals a moderate level of financial literacy among the Swiss population. On average, respondents were able to answer only 51.7% of the questions correctly, or 5.17 out of 10.

However, the significant difference between the genders is noteworthy: men were able to answer significantly more questions correctly (58.5%) than women (44.7%).

It is also noteworthy that women were almost twice as likely to answer «Don't know». When considering the proportion of wrong answers, it is almost identical for women and men.

This may indicate that women tend to be more cautious and, when uncertain, prefer to refrain from answering rather than express an opinion.

Financial literacy over the course of aging

When looking at the correlation between age and financial literacy, there is a slight increase in the number of questions answered correctly with increasing age. However, this increase is not particularly pronounced.

It can be assumed that the increase is due to a combination of life experience, cumulative learning and a longer engagement with financial topics. However, it is also possible that this simply reflects the fact that inheritances are received late, wealth increases with age according to statistics, and people are more interested in investment topics when their financial wealth exceeds their own human capital.

Is financial literacy dependent on income?

One of the strongest correlations that the data unequivocally reveals is the correlation with income: as income increases, so does financial literacy, statistically speaking. While people with an income of less than 4'500 francs were able to answer only 39.4% of the questions correctly, people in the highest income bracket were able to answer 66% of the questions correctly.

It is not clear what is cause and what is effect here. Do people only start to take a greater interest in financial matters when they have a higher income? Or do they have a higher income because they have greater financial expertise? Or is there an unknown third factor at play here that affects both income and financial knowledge?

Education is the key to financial literacy

As with income, we also see a pronounced pattern in terms of financial literacy when it comes to education. While 61.8% of the questions were answered correctly by people with a high level of education, the proportion of questions answered correctly by people with a low level of education was only 35.2%.

At first glance, this may seem unspectacular, since financial literacy is also education in the broader sense. However, financial education is rarely part of the curriculum in the Swiss school system. Depending on the subject area, even at the tertiary education level – ETH, university – you can avoid attending a course on finance (at the HSG it is probably more difficult, we hope).

So here, too, the question of cause and effect arises.

And: How can the basics of dealing with money and assets be taught to broader sections of the population?

Our data clearly shows how pronounced socio-economic differences will still be in 2024 when it comes to financial literacy.

The importance of a sound financial education as a basis for informed and effective investment decisions should not be underestimated.

It can be assumed that there is room for improvement here.

Regional differences in financial literacy

The Röstigraben is the figurative expression for the language border between the German-speaking and French-speaking parts of Switzerland. But does this border also exist in terms of financial literacy?

The results of the study show that in German-speaking Switzerland, at 53.8%, financial literacy is higher than in French-speaking Switzerland, at 45.6%.

The True Wealth Financial Literacy Index thus shows that German-speaking Switzerland performs better on average than French-speaking Switzerland.

However, if we limit ourselves to the three most basic questions, i.e. the «Big Three» (interest, inflation, diversification), the gap between the two language regions is negligible.

But it is too early to sound the all-clear: the knowledge gaps where the Röstigraben opens up take their toll.

People in French-speaking Switzerland have potential to catch up on ETFs

While the differences in basic knowledge of inflation, interest rates and diversification between regions are not very noticeable, there is a more pronounced difference in the understanding of specific asset classes.

This is particularly noticeable when it comes to knowing the advantages of ETFs: 33% of respondents from German-speaking Switzerland were able to name them correctly, while in French-speaking Switzerland only 18.3% had the relevant knowledge.

The German-speaking Swiss also performed significantly better in their understanding of equities and bonds. While 74.1% of German-speaking Swiss were able to answer the questions about equities correctly, only 59.9% of French-speaking Swiss were able to do so.

Switzerland is among the leaders

The so-called «Big Three» questions on interest rates, inflation and diversification are often used to compare financial literacy at the international level. Switzerland performs very well in this regard compared to a recent study by the European Commission (Flash Eurobarometer 2023).

The first of the so-called «Big Three» questions relates to the understanding of interest.

In our Swiss study, respondents were able to answer this question correctly in 82% of cases in 2024, which is a very high figure.

Note: A standard has been established in finance for the «Big Three» questions, and we have also asked this question about the understanding of interest in this way. A more recent study by the EU Commission in 2023 asked this question in a slightly more complex way, including the effect of compound interest. In the EU, 45% of respondents were able to answer the question about compound interest correctly. In contrast to the other two «Big Three» questions, the results for this question are therefore not directly comparable.

The second question of the «Big Three» addresses the concept of inflation and its impact on purchasing power when the rate of inflation is higher than the interest rate on a savings account.

Here, too, the Swiss participants did slightly better than our neighbors: over 76% answered the question correctly. This puts Switzerland just ahead of countries such as Austria, Luxembourg and Germany, which also achieved very high scores.

The third and final question of the «Big Three» deals with diversification, a central concept in the responsible handling of investments. Here, too, Switzerland achieves very high values in international comparison and exceeds the EU average by about 10%.

Overall, the Swiss population has not only done well compared to the European average, but also in comparison to their neighboring countries.

Outlook

To sum up, the Swiss population's general financial education in 2024 is at a moderate level of 5.2 points (i.e. the respondents were able to answer 52% of the questions correctly).

Not everyone is interested in finance and investment topics. However, if you don't know the most important principles of money management, you can't take responsibility for your financial well-being.

The True Wealth Financial Literacy Index 2024 is the first edition of the index. It will provide a tool for monitoring the further development of financial literacy in Switzerland.