How much do Spaniards know about finance?

The financial knowledge of people is key when it comes to taking basic decisions such as taking out a mortgage or investing in a pension plan. The survey, which was carried out between the fourth quarter of 2016 and the second quarter of 2017, forms part of the CNMV’s Financial Education Plan, which aims to improve the public’s financial literacy. The study measured the knowledge and understanding of financial concepts of the Spanish public aged between 18 and 79 years.

How was the study carried out?

The three standard questions used in different studies for over a decade were posed to gauge the financial knowledge of those surveyed. The first was on inflation, which was correctly answered by 58 percent of those questioned. The second was on compound interest which less than half of those surveyed got right (46 percent). The third question was on diversification of risk, which 49 percent of those taking part in the survey answered correctly, while 27 percent did “not know” the answer.

The study analyzed the results of the survey taking into account the characteristics of those taking part. Family structure, total income and properties owned were looked at in order to identify some demographic factors in common.

For example, the percentage of correct answers was higher among those with a university education and higher incomes. If the results are filtered on the basis of gender, the study shows that women are more likely to respond ‘don’t know’ to the question (40 percent for women vs. 26 percent for men) regardless of the country they are from.

In addition to these concepts, the survey covered the population’s knowledge of some basic financial products. Nearly all Spaniards are used to dealing with products such as health and life insurance, credit cards, mortgages and loans. This is also the same for pension plans, stocks and investment funds, of which 89 percent of the Spanish population is familiar. Three out of every four individuals have knowledge of savings accounts and term deposits and four out of five have heard about fixed-income assets.

With respect to savings, the survey showed that 43 percent of the Spanish population (mainly those within the age group 55-64) own some sort of product of this nature (savings account, pension plan, investment fund, stocks or fixed-income assets). Only 11 percent of those surveyed have allocated part of their income to a pension plan in the past 12 months, while 63 percent have their savings in a current account.

The survey also showed that 41 percent of the population (mostly those aged between 35 and 44 years) have taken on some form of debt (mainly mortgages and personal loans).

The report also provides information on the acquisition of financial products. Around 38 percent of those surveyed have acquired a financial product in the past two years. Credit cards, personal loans and savings accounts are the most common products. Specifically, 20 percent of the population acquired some type of savings product, with the percentage increasing with the level of education and, above all, household income.

Most of those surveyed (two out of three, or specifically 62 percent) opted to acquire these products from a single company or financial institution. The specific information provided by this company was key in the consumer’s final decision. It is interesting to note that 33 percent of the sample named their network of friends as the most reliable source of information.

Lastly, the study, revealed the financial fragility of Spanish households. While the study showed that 61 percent of individuals have managed to save over the past 12 months, 28 percent live in households where spending had surpassed income over the same period. Half of the households with spending above income (51 percent) financed the shortfall by drawing on savings without excluding other means. The second most common way of bridging this gap (used by 36 percent of the sample) is by borrowing from friends and family members.

In terms of financial leeway, the results of the survey show that 52 percent of households could maintain their spending for six months without taking on debt or selling property if they lost their main source of income.

And on an international level?

The survey forms part of the International Network on Financial Education project promoted by the OECD. The network measures the financial knowledge, attitudes and behavior of the population.

The figures obtained in Spain can be compared with those of other countries. Studies carried out over a number of years, in general, show that the financial knowledge of Spaniards is below the European average, mainly as regards the diversification of risk. This is backed up with studies carried out at a European level aimed at better understanding the relationship that exists between financial education and financial risk.

Likewise, debt levels in Spain at 68 percent of the total are above the EU average of 49 percent. There is also a difference between the number of individuals who have acquired some type of financial product in the past few years, which is 38 percent in the case of Spain, compared with an average of 50 percent in the EU, according to the report.

This survey does not cover 15-year-old Spaniards whose financial knowledge and skills is gauged by the PISA (Program for International Student Assessment) Report carried out by the OECD and sponsored by BBVA. Once again, this report shows that the level of knowledge of young Spaniards in this area is below the average in the OECD.

At 68%, debt levels in Spain are above the EU average of 49%. The number of individuals who have acquired some type of financial product in the past few years is 38% of the total in Spain, compared with an average of 50% in the EU, according to the report.

This survey does not cover 15-year-old Spaniards whose financial knowledge and skills is gauged by the PISA (Program for International Student Assessment) Report carried out by the OECD and sponsored by BBVA. Once again, this report shows that the level of knowledge of young Spaniards in this area is below the average in the OECD.

We at BBVA are aware of the importance this issue has for the welfare of people. This commitment to financial education is evident in the Group’s investment of 73 million euros in financial education programs, which since 2008 has benefited more than 11 million people and SMEs. We also work together with the main global organizations and institutions in financial education and inclusion through the Center for Financial Education and Capability to put the opportunities of this new era within reach of everyone.