Korean financial literacy is higher than the OECD average

Finance

Published: 29 Mar. 2021, 14:43 Updated: 29 Mar. 2021, 19:56

Korean financial literacy is higher than the OECD average

Korea has a higher level of financial literacy than the Organization for Economic Cooperation and Development (OECD) average, according to a report by the Financial Supervisory Service and the Bank of Korea on Monday.

Out of a full score of 100 points, Koreans earned 66.8 points based on a financial literacy test conducted by the two institutions last year on 2,400 Korean adults between ages 18 and 79.

The latest OECD average was 62 points, recorded in 2019.

Last year's score is also the highest since the Korean authorities started conducting the test jointly every two years since 2016. In 2018, Koreans scored 62.2 points, 4.6 points lower than their 2020 score. In 2016, they scored 66.2 points.

The financial literacy test was conducted based on a guideline provided by the International Network on Financial Education, an OECD organization. The test assesses literacy based on three areas: financial knowledge, financial behavior and financial attitude.

The financial knowledge category tests whether consumers have basic knowledge on financial products to make well-informed financial decisions. The financial behavior category assesses whether consumers are acting to pursue financial well-being in both the short and long term, such as by not putting off bill payments. The financial attitude category assesses the attitude towards money and planning for the future, such as if this person is living day to day.

Koreans earned a high score in financial knowledge, however relatively low on financial attitude. When converting each of the three categories into 100 points, Koreans earned 73.2 points on financial knowledge, 65.5 points on financial behavior and 60.1 points on financial attitude.

According to the report, six out of 10 Korean adults achieved the minimum score in financial knowledge and financial behavior set by the OECD, however only four out of 10 achieved the minimum target in terms of financial attitude.

Financial knowledge scores were over 70 points for those in their 20s through 60s, but those in their 70s earned 56.1 points. People in their 40s earned the highest score, at 76.9 points.

When further breaking down sections that make up financial behavior scores, Koreans scored high on their active saving habits and efforts to cover household debt, however they proved to be relatively weak in buying carefully and setting long-term financial goals.

As for financial attitudes, people in their 20s and 30s earned the lowest average score, at 58.9 points as many of the respondents in that age group exhibited live-for-today attitudes.

"People with high levels of financial literacy have the ability to respond to unexpected personal financial crises," the central bank said in report. "We will strengthen early financial education for young adults to help them learn sound financial attitudes and also support education for the elderly so they can make rational financial decisions."

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]