Financial Inclusion

Indians more financially literate than Americans

According to a study conducted by the economists at the Federal Reserve Bank of Chicago,a majority of Indians (80 per cent) responded correctly to a given financial literacy test, while only 60 per cent of respondents from the American population gave right answers to the test.

The findings of this study also reaffirms the better preparedness of Indians in fighting the economic crisis which rattled many of the big economies globally.

According to the study many Americans do not understand the difference between compound and simple interest and the characteristics of financial assets such as stocks and bonds, the study has noted.
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“There is considerable evidence that a large segment of the US population is not financially literate. This means that many people do not understand basic financial concepts and products well enough to make sound short  and long term financial decisions for themselves and their families,” the study has reported.

The study has also revealed that a majority of Indians (97 per cent) take an interest in creating new financial plans, while in the US not more than one per cent of the population made financial plans.

In terms of taking loans, Indians emerged as more conservative as most of the loans that were taken by an individual were for buying a home or a car, while Americans maintained large outstanding balances on credit cards even when cheaper forms of credit were available.

US citizens also lagged behind when it came to planning for retirement, reaching it with little or no savings as majority of those surveyed were unable to accurately report their Social Security or pension entitlements.

The survey also suggested that financial counselling is an important tool in educating consumers and would help in their decision making. People can be educated through seminars on retirement planning along with state-mandated personal finance classes.

The study is based on various research reports conducted by the federal bank of chicago in different parts of the world including the US and India.

Abhay N

Author : 

Abhay is the founder and managing editor of India Microfinance. He is passionate about microfinance, financial inclusion and social entrepreneurship in India.

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2 Comments

2 Comments

  1. Rituparna

    July 14, 2010 at 3:24 pm

    How big are the groups of Indians and US Americans surveyed? Do these groups actually represent India and the US? Without knowing the composition of the target groups, the article could be misleading.

  2. madhuramsubbarao

    July 17, 2010 at 12:49 pm

    The article on Indians has attracted me to vent my pent up feelings for over a half a century
    Reasons.
    Indians who do elementary mathematics in Indian schools work on simple interest and compound interest for two weeks each in high school education.

    Ever since England became a world emperor more final and total than the Romans began to think superior to Indians.
    Indian culture is first in the world.
    This culture has moral toning of economics and ecology.
    Pirate literary was no other than Adam Smith who wrote the first book on economics as the making of the wealth of nations.
    His chapter on division of labour is copy in cognito of the caste system. There is no moral overtone in this.
    2nd Pirate of ecology was
    Charles Darwin who copied in cognito from Dasavathara of India which begins with the fish as first specie.
    Original was the water serpent of mud which was changed to fish by Vaishnavas.
    Indians who are vegetarians do not eat meat. Meat eaters do not go for vegetables. Thus prices were in control. With import of Peter that we can eat all people eat both. When meat is costly they eat vegetables. When vegetables are costly they eat meat. So both go up.
    Reducing population is a Hindu cannon they do by killing criminals. Ever since Christ gives life everlasting to criminals Malthusian growth of population is operant. Capitalists promote population to reduce wages. Indians say that the volatile poor sector will revolt. So if you have less people they have more to eat.

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