Indians score over Americans in financial literacy: Study
New York: Indians can take prudent financial
decisions and avert an economic crisis better than the
Americans as financial literacy level in the world`s largest
democracy is higher than in the US, says a study.
According to a study by economists at the Federal Reserve
Bank of Chicago, majority of Indians (80 per cent) responded
correctly to a financial literacy test, while only 60 per cent
of respondents from the US gave right answers to the test.
The findings of the study also reaffirms better
preparedness of Indians in fighting the recent economic crisis
which rattled many of the big economies globally.
Most of the Americans do not understand the difference
between compound and simple interest, the characteristics of
financial assets such as stocks and bonds, the study noted.
"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
Moreover, majority of Indians (97 per cent) take interest
in creating financial plans, although the US has not more than
one per cent planers.
In terms of taking loans, Indians are more conservative,
most of the loans taken by individuals were for buying a home
or a car, while American maintain large outstanding balances
on credit cards when cheaper forms of credit are available.
Even the US` citizens fail to plan 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.
However, the survey suggested that financial counselling
is an important tool in educating consumers in their decision
making. People can be educated through employer-provided
seminars on retirement planning, to state-mandated personal
finance classes, to one-on-one mortgage counselling.
The study is based on various research reports conducted
in different parts of the world including the US and India.
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