Strengthening Financial Literacy in Germany

2. The contribution of higher financial literacy levels to individual financial well-being and resilience

Financial literacy levels in Germany are relatively high in international comparison (OECD, 2023[3]; 2024[1]), but they could be substantially improved, especially among particular groups of the population, including the most vulnerable. Higher levels of financial literacy would contribute to the financial well-being of adults and young people, with positive consequences on the resilience of the German economy and the development of its capital markets.

The evidence highlighted in this section was collected in Germany in October 2022 using the OECD/INFE Toolkit for Measuring Financial Literacy and Inclusion (OECD, 2022[2]) (see Quantitative evidence on financial literacy). This evidence is presented more in detail in the preparatory report for the Strategy (OECD, 2024[1]).

Levels of financial literacy, financial resilience, and financial well-being

Financial literacy

Financial literacy levels of adults in Germany are relatively high in international comparison: adults have on average a financial literacy score of 76 out of a possible 100 using the OECD/INFE methodology (OECD, 2024[1]; 2022[2]). This score is calculated as the sum of its three components1:

• 30 out of 35 on financial knowledge

• 33 out of 45 on financial behaviour

• 13 out of 20 on financial attitudes.

This score indicates that there is considerable room for improvement, particularly on financial behaviours and attitudes. Moreover, the average hides the fact that there are groups of the population who display lower financial literacy, with negative implications for their financial well-being and potential adverse repercussions on the economy. Indeed, individuals with lower levels of income and education have a lower level of overall financial literacy than individuals with higher incomes and education. Importantly, women have lower financial knowledge and confidence than men.

The gaps identified by the financial literacy measurement should be considered in the design of all financial literacy initiatives, irrespective of the audience they target and whether they focus on a specific area of the financial sector. For example, a minority of adults in Germany shop around when looking for financial products: only 35% of adults compare different offers from more than one financial services provider before buying a financial product, and just 37% has sought independent advice (OECD, 2024[1]). In addition, around one fifth of adults do not understand simple and compound interest. Both shopping around and understanding the application of simple and compound interest are key elements of financial literacy.

The evidence collected also indicates that digital financial literacy levels could be improved, as the average digital financial literacy score for Germany using the OECD/INFE methodology is 64 out of 100 (OECD, 2024[1]).

Financial resilience and well-being

With regards to financial resilience, i.e. the ability of individuals to resist, cope and recover from negative financial shocks, adults in Germany score above the EU average,2 but around 30% of adults report not having money left at the end of the month, and 25% cannot cover living expenses for at least three months if they lost their main source of income (OECD, 2024[1]).

Subjective levels of financial well-being are also above the EU average, but a non negligeable percentage of adults living in Germany experience some form of financial stress: only around half disagree with the statements “My finances control my life” or “I am just getting by financially” (OECD, 2024[1]).

The contribution of higher levels of financial literacy to the German economy

The evidence collected in Germany shows that financial literacy does make a difference for individual financial outcomes, and it can positively contribute to the financial well-being of people living in Germany (OECD, 2024[1]).

• Adults in Germany with high financial literacy are 80% more likely to feel confident they made a good job at planning their retirement, and 70% more likely to hold pensions products, after accounting for socio-demographic characteristics.

• They are 120% more likely to hold investment products than those with low financial literacy, after accounting for socio-demographic characteristics.

• They also display higher levels of financial resilience (by five percentage points), after accounting for socio-demographic characteristics.

Greater spread of these individual attitudes and behaviours among the population would also benefit the resilience of the German economy as a whole and support the development of its capital markets.

Notes

← 1.  For details on how the score is calculated please see the OECD/INFE Toolkit for Measuring Financial Literacy and Inclusion (OECD, 2022[2])

← 2.  EU average calculated on the values for Croatia, Cyprus, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Spain, and Sweden.