Financial literacy is a fundamental life skill, and its importance is growing

Financial literacy is globally recognised[i] as a fundamental life skill in the 21st century, which is essential for achieving and maintaining the financial well-being of individuals and society. Its growing importance is driven by a number of factors: changes in social systems and the transfer of risks to individuals; the increasing diversity and complexity of financial products and instruments, including digital ones (for example, crypto-assets); the “democratisation” of the financial sector and investments as a result of the dynamic development of digital technologies; the emergence of new, alternative forms of financial advice (e.g. finfluencers); and the increasing frequency and complexity of financial fraud. In addition to these factors, the current economic context of rising inflation and interest rates, and consequently higher living costs, must also be taken into account, as well as the dynamically changing labour market. Global-level risks directly affecting financial well-being are increasing, such as the pandemic and its consequences, climate change and the associated risks of natural disasters, and the unstable geopolitical environment.

Despite the growing importance of financial literacy, its level globally remains unsatisfactory, even in countries with well-developed financial markets and high levels of individual participation in them. This observation is confirmed by the “OECD/INFE 2023 International Survey of Adult Financial Literacy”, published in December 2023 by the Organisation for Economic Co-operation and Development (OECD) / the International Network on Financial Education (INFE).

Bulgaria and the world – where are we on the map of financial literacy

Naturally, a particularly important question for us is where Bulgaria stands on the global map of financial literacy. A direct comparison of results and data from the above-mentioned survey cannot be presented, as Bulgaria did not participate in it. Nevertheless, for this purpose we can rely on the results of the “Financial Literacy of Adults in South East Europe”survey conducted by the OECD in 2020.[ii] Although there is a three-year difference in the periods when the two surveys were conducted, they were implemented based on the OECD’s instruments and methodology, which allows for a certain degree of comparability of the results.

The data presented below are based on the two aforementioned OECD surveys – for Bulgaria, the data are taken from the “Financial Literacy of Adults in South East Europe 2020” survey,[iii] and for the other countries from the “OECD/INFE 2023 International Survey of Adult Financial Literacy”.

In general terms, the OECD methodology is based on its definition of financial literacy, examining its individual components – knowledge, behaviour, and attitudes – on the basis of which an overall financial literacy score is formed. Levels of financial inclusion and financial well-being/resilience are also examined separately.

Financial literacy: overall results

The average financial literacy score for the adult population in Bulgaria is 58 out of 100 points and is comparable, although slightly lower, than that of all participating countries and economies in the 2023 survey – 60 points. Overall financial literacy is higher in OECD countries, at 63 out of 100 points.

Results for the “financial knowledge” component as an element of financial literacy

The first component of financial literacy – “financial knowledge” – examines respondents’ objective knowledge of topics such as inflation and purchasing power; simple and compound interest; risk and return; and diversification.

The average financial knowledge score across all participating countries and economies in the 2023 survey is 63 out of 100 points. OECD countries record higher results, at 67 points. Financial knowledge levels are highest among adults in Hong Kong, China (91), Germany (85), and Estonia (78). According to data from the 2020 survey, Bulgaria achieves a score of 58 points on this indicator. This result – lower than the average results cited above – clearly outlines the deficits in financial knowledge among the Bulgarian population. At the same time, it should be noted that the average score for the countries of South East Europe in the 2020 survey is at the same level as Bulgaria – 58 points.

Results for the “financial behaviour” component as an element of financial literacy

The second component of financial literacy – “financial behaviour” – is directly related to consumers’ financial resilience and well-being in both the short and long term. This indicator examines topics such as tracking and controlling cash flows, saving and long-term planning, and making considered purchases.

Data from the 2023 survey show that there are significant differences in financial behaviour within and between the participating countries and economies. The average financial behaviour score across all participating countries is 61 out of a maximum of 100 points (62 out of 100 points in OECD countries). Bulgaria is close to these levels, with a score of 59 points on the “financial behaviour” indicator. On this measure, Bulgaria performs slightly better compared to the overall level of 58 points for the South East European countries that participated in the 2020 survey. It is interesting to note that the thriftiness of Bulgarians is evidently not just a myth – 77.6% of Bulgarians stated that they had saved money in the past 12 months, compared to an average of 67% for South East Europe. In fact, across most elements of this component, Bulgarian adults achieve better results compared to the other countries included in the 2020 survey; an exception is, for example, budgeting. In this area, Bulgaria’s result is 55 points, compared to a South East Europe average of 63.

Results for the “financial attitudes” component as an element of financial literacy

The third component of financial literacy – “financial attitudes” – is related to the understanding that even if a person has the knowledge and skills to act in a certain way, their attitude towards money can influence their financial decisions and behaviour. In this context, respondents’ attitudes towards money and future planning are examined. The focus is on the attitude/life preference “spend and live for today” (short-term financial attitudes) versus more long-term financial attitudes. It is assumed that short-term financial attitudes may hinder the improvement of financial resilience and well-being; therefore, attitudes oriented towards longer-term financial thinking are considered positive.

As expected, there are significant differences in financial attitudes among the countries and economies participating in the 2023 survey. The average score for this component is 56 out of 100 points (58 out of 100 points in OECD countries). The highest results – i.e. the strongest preferences for longer-term financial security – are observed in Thailand (77), Spain (70), and Sweden (67). The comparison with Bulgaria’s results is positive – Bulgarians score 58 points, on par with OECD countries. By comparison, the average score of the other South East European countries in the 2020 survey is 55 points.

The level of financial literacy of Bulgarians does not differ significantly from the international average

If we are to draw one conclusion from the data presented above, it could be simplified as follows: “Our theory is lagging.” The weakest result among the three components forming the overall level of financial literacy is that for financial knowledge. The positive aspect is that Bulgarians demonstrate preferences for longer-term financial thinking – on this indicator we are on a par with OECD countries. In fact, it could be assumed that the average results for Bulgarians may have improved since 2020 due to the so-called teachable effects of the pandemic and its consequences, the economic context of high inflation, rising interest rates, increasing living costs, and others.

The presented data outline a very general picture, and based on them we can assume that educational interventions aimed at increasing financial knowledge would be valuable and effective, and would reinforce the good results observed in financial behaviour and attitudes.

Nevertheless, it should be taken into account that a more detailed examination of the survey data would reveal differences – typically significant – between individual social and demographic groups. The effectiveness of educational interventions is directly linked to tailoring them to the specific deficits, educational needs, and attitudes of the respective groups.

AUTHOR: ROSITSA VARTONIK

[i] G20 (2021), “Italian G20 Presidency Third Finance Ministers and Central Bank Governors Meeting Communiqué”, accessed on 11 August 2023.

[ii] OECD/INFE (2023), OECD/INFE 2023 International Survey of Adult Financial Literacy.
Participation in the “OECD/INFE 2023 International Survey of Adult Financial Literacy” included 39 countries and economies, including 20 OECD member countries and 8 G20 countries.

[iii] OECD (2020), Financial Literacy of Adults in South East Europe.
Participation in the “Financial Literacy of Adults in South East Europe” survey in 2020 included Bulgaria, Croatia, Georgia, North Macedonia, Moldova, Montenegro, and Romania.