Frontpage News 2014 The Danes overesti...

The Danes overestimate personal finance skills

5 March 2014

The vast majority of Danes claim they have "good control of their personal finance", but their actual abilities within the subject lag behind. This shows a new comprehensive survey.
 
A&B Analyse has, for the Danish Bankers Association, made an extensive survey with a high number of respondents, making it possible to dig a little deeper into the study of Danes’ skills in personal finance.
 
It involves, among other things, the possibility of testing groups within the population with each other, including on age, education and income.
 

High self-esteem among Danes

It is also possible to divide the population into people who feel they have good control of their personal finances and people who have not. A full 82 percent of the population declare themselves to either "strongly agree" or "agree" with the statement "I have good control of my personal finances."
 
Only about 5 percent either "disagree" or "strongly disagree" with the statement, which underlines that self-confidence on this area is high among the Danes.
 

Actual skills lag behind

The survey includes a test of financial literacy from six questions about personal finance and place Danes on a scale of 1-6 based on the number of correct answers. 
 
The national average is 4.7 right answers and from that one can characterise people with 4 real answers or less as having poor financial literacy, and those with 5 or 6 correct as having good financial literacy.
 
Nationally, that division makes 61 percent people with good financial literacy and 39 percent with poor financial literacy. 
 

Great self-confidence - poor financial literacy

If the test of the actual financial capabilities is compared with the survey on how well the Danes themselves believe that they are in control of personal finances, it is evident that 30 percent of the population has a good take on personal finances but still lag behind when the most basic economic concepts are to be applied in practice.
 
This underlines a fundamental problem: the risk that many people risk making wrong decisions in good faith. It is not only bad for the individual but also for the society. 
 
Figure: Self-confidence in and actual skills in personal finance 
Source: A&B Analyse for the Danish Bankers Association.
Note: The above is based on 3,366 respondents in the age group 15-70 years.
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