It’s 2022, why Are We still Lacking Financial Literacy?

Financial literacy of the general population is lacking. This is a common finding in research studies and surveys (Lusardi 2019, p. 2). Yet, more than ever before, individuals need to take responsibility for their personal finances. The demographic shift and an aging population let many people wonder if they will ever receive a sizable state pension – if one at all.

Add to this that the financial world has changed dramatically over the last 15-20 years. Two decades ago, users managed practically all their bank and investment transactions with their trusted bank advisor in a local branch. Nowadays, users manage (almost) all transactions using their smartphones. Even small retail investors have access to the globalized financial market and new asset classes like cryptocurrencies.

Hence, individuals are faced with more responsibility for and choice on how to invest their personal finances than ever before. Yet, unfortunately lack the knowledge to use these possibilities with confidence. Science tells us that higher financial literacy translates into better saving, better investment and better debt management as well as a higher likelihood to attain personal wealth.

The foundations: what is meant by financial literacy

The term literacy generally means that a person can read and understand a subject. Applied to financial literacy, this would at least pertain to understanding and being able to understand important financial skills and principles, so they can make use of the financial products and services offered on the financial markets today in order to meet their short-, mid- and long-term financial goals.

The OECD offers a definition of financial literacy that – in addition to knowledge and understanding – stresses the aspects of skills, motivation and confidence to apply that knowledge to responsible decision making in various kinds of financial situations (OECD 2011).

Such financial goals can include a wide variety of financial obligations, whether it is buying/building a house, getting a new car, paying for children’s college education, supporting causes one deems important, etc. Financial literacy is essential in order to have enough money for retirement and avoid making costly investment mistakes, get too deep into debt or fall victim to fraudsters and unscrupulous “investment advisors”.
Put more simply, a financially literate person has at least a solid understanding of and can make use of financial skills like:

Banking: The ability to understand and make use of essential (mobile/online) banking services like bank transactions, bank transfers, debit and credit cards, savings accounts, insurance and wealth management.

Budgeting: The ability to make a short-, mid- and long-term plan and determine how much money is to be spent when on

Saving: The (spending discipline and) ability to structure personal expenses in such a way that ongoing expenses are lower than regular income; as a result, the leftover money can be put aside towards long-term investing and personal retirement.

Investing: Understanding the wide variety of available asset classes, investment vehicles and financial instruments and prioritizing or focusing on one or a small number of asset classes to develop more competence in placing and managing one’s investments.

Manage credit: The ability to limit oneself to responsible and modest use of credit cards.

Manage dept: The ability to limit personal debt and structure expenses to effectively and ongoingly pay off one’s mortgages and loans.

Financial IQ: General understanding of important financial concepts like bond prices, interest, compounding, diversification, risk management.

Now that we have covered the foundations, the next part of the series is about the development of banking over the last 20 years.


Furrer, F., & Dietrich, A. (2012). Geschichte des Online-Banking: Vom Telebanking zu Mobile Banking. URL:

Lusardi, A. (2019). Financial literacy and the need for financial education: evidence and implications. Swiss Journal of Economics and Statistics, 155(1), 1-8.

OECD (2011). Measuring financial literacy: Questionnaire and guidance notes for conducting an internationally comparable survey of financial literacy. Periodical Measuring Financial Literacy: Questionnaire and Guidance Notes for conducting an Internationally Comparable Survey of Financial Literacy. URL:

Wittkamp, B. (2020). Mobile Banking. In Köpfe der digitalen Finanzwelt (pp. 233-244). Springer Gabler, Wiesbaden.