Photographer: Kin Cheung/AP

Hong Kong Knows More About Money, but France Is Better at Managing It

A global survey of who’s best at handling their finances left out Americans, which turned out to be just as well.
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When it comes to abstract financial concepts, people in Hong Kong know their stuff.

It’s the French, however, who rank highest in the world on their overall skill with money, according to an almost-global study released Wednesday by the Organization for Economic Cooperation and Development. 

Some 52,000 adults in 30 countries were tested on their financial knowledge and rated on how they behave, and feel, about money. France ranked highest overall, with a score of 14.9 out of a possible 21, followed closely by Finland. Generally, the wealthier the country, the higher the score: Norway, Canada, and Hong Kong rounded out the top five. But there were exceptions: The U.K., with an annual gross domestic product per capita of $44,000, scored 13.1, below the average for all countries surveyed. The worst scores were in Belarus, with 11.7, and Poland, at 11.6.

The U.S. didn’t participate in the OECD study, and the group didn’t immediately say why. But there’s no shortage of similar studies of American financial acuity. In July, the Finra Investor Education Foundation released a survey of more than 25,000 Americans measuring their financial abilities. That report found that the stability of Americans' finances got stronger in the last few years, even as their knowledge slipped somewhat

A common way to gauge skill with money is to quiz people on concepts including inflation, investment risk, and compound interest. In the OECD study, people were asked seven basic questions on financial knowledge: On average, 56 percent got at least five of them right. Denizens of Hong Kong were the best on this test, with 84 percent correctly answering five questions, while folks in Malaysia and South Africa scored lowest, with about a third of respondents getting five right.

By way of comparison, just 37 percent of Americans could answer at least four of five differently worded knowledge questions in Finra’s U.S. study.

People often have trouble with compound interest–the idea that interest can build up exponentially over time. The OECD quizzed people on how compound interest would affect a savings account: Overall, 42 percent got that one right, ranging from just 7 percent in Belarus to 65 percent in Norway. Among Americans surveyed by Finra, however, only a third correctly answered a question about how a 20 percent interest rate would compound on a $1,000 loan through the years. 

Many of these questions are really math problems. And, while math skills are important for keeping track of your money, they only go so far. If someone is truly hopeless with money, a lesson about compounding isn’t going to help. That proposition is supported by recent research showing that teaching people about money is a lot harder than it might look.

“Teaching financial facts is not the solution,” says John Lynch, a professor at University of Colorado’s Leeds School of Business. He co-wrote a 2014 study that analyzed 201 studies of financial literacy programs and discovered they had “extremely small, minuscule effects on financial behavior.”

Rather than teaching abstract concepts, financial education would be more effective if it gave people certain skills, Lynch says—preferably close to the time when those skills are needed. In the U.S., for example, high school students might be taught about student loans, and the costs and benefits of going to expensive colleges. New employees at a company might be taught how to set up their retirement plan.

The OECD, like other studies, did ask about financial behavior and attitudes in addition to knowledge, and this is where France won the day. While France and Finland lagged behind Hong Kong on how well they grasped financial concepts, their preeminence in financial behavior and attitudes landed them at the top of the OECD’s overall rankings. In this section of the survey, on average 60 percent of respondents in 30 countries said their household has a budget. Finra found just 56 percent of Americans could say the same.

Of course, the presence of a budget only tells you so much about a person’s financial acumen. While many benefit from knowing exactly how much they have to spend each month on each of life’s necessities—housing, food, electricity—some people’s incomes and expenses are just too unpredictable to plan.

“You’re not going to become rich by not drinking lattes,” says Anand Marri, a professor at Columbia University’s Teachers College who is head of outreach and education at the Federal Reserve Bank of New York. “Hard and fast rules don’t work.”