David Dodwell

Now, more than ever, we need to know how to manage our money. Yet many of us are financially illiterate

As Covid-19 brings hardship, we need to cut spending, conserve our savings and assume things are going to get worse for many months before any kind of recovery

However, recent research suggests near-crisis levels of financial illiteracy, raising the prospect of greater suffering until the pandemic is under control

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Recent research indicates low levels of financial literacy across several countries that could exacerbate the economic impact of the Covid-19 pandemic. Photo: Shutterstock

David Dodwell

Published: 6:45am, 12 Dec 2020Updated: 6:45am, 12 Dec 2020

As the Covid-19 pandemic continues to wreak havoc, with the prospect of a vaccine still distant, many families in Hong Kong and worldwide are beginning to prepare for the grimmest winter of a lifetime.

As people lose jobs and have their salaries cut while governments slash the job-support packages that have kept so many companies afloat in the past six months, millions of families are bracing for hardships they have not faced in decades and never in their wildest nightmares imagined might occur.

Now, more than at any point in most of our lifetimes, we need to cut spending, conserve our savings and work from an assumption that things are going to get worse for many months before any kind of recovery.

Never has it been more important to be financially literate and savvy about how we spend. Here is the problem. In the words of Annamaria Lusardi, who heads George Washington University School of Business’ Global Financial Literacy Excellence Centre, the world faces “near-crisis levels of financial illiteracy”.

Lusardi’s concerns were illustrated in the Organisation for Economic Cooperation and Development’s recent international survey of adult financial literacy. To measure the basic financial literacy of its 125,000 respondents spread across 26 economies, the OECD set a series of questions.

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Coronavirus: What impact will the economic fallout from the Covid-19 pandemic have on you?

For example: 1. If you have US$100 in a savings account with an interest rate of 2 per cent a year, how much would you have in the account after five years? $102? Less than $102? More than $102?