He Bank of Spain published on Tuesday the 2021 Financial Skills Survey, which measures the financial knowledge of Spaniards in key aspects such as inflation. Although an improvement over the 2016 results, when 42% did not know or answered questions about inflation incorrectly, this is still a third of Spaniards does not answer the survey correctly.

To find out the skills of the Spaniards, the Bank of Spain asks a preliminary question: “Imagine that five brothers receive a gift of a total of 1,000 euros. If they split the money equally, how much will each get? The next question is asked: “if they had to wait a year to receive their share of 1000 euros, and inflation is 1%, within a year they will be able to buy: 1. More than they could buy today with their share of the money; 2. The same amount; 3. Less than they could buy today.”

Answers in the survey that confirm that inflation harms purchasing power are considered correct. That is, after inflation of 1%, you can buy less than you can buy today with the same money.

Considering this question, 65% of Spaniards answer correctly26% get it wrong, and 7% say they don’t know the answer. The percentage of respondents who did not respond was less than 1%. The Bank of Spain reports that understanding of inflation has improved compared to 2016, which may be affected by the current inflation episode.

The study also asks questions about compound interest and risk diversification in investments. 41% of Spaniards answer the first question correctly, and 52% answer the second question correctly. Specifically, the question of compound interest requires you to calculate the interest on a savings account by taking into account not only the amount saved, but also the interest accrued since then. For risk diversificationforces us to answer whether it is true that “you can reduce the risk of investing in the stock market by buying a wide range of stocks.”

The average number of correct answers to the three questions is 53%, which represents a two-point improvement over the previous survey. However, despite this improvement, Spain’s level is still below average among our neighboring countries., about 57%, according to Angel Gavilan, director general of economics and statistics at the Bank of Spain, during the presentation of the study. However, Gavilan noted that data for the rest of the European economies has not been updated, they will do this in mid-December.

Gavilan stated that “There is a lot of room for improvement” and that it is the responsibility of government agencies as well as economic journalists who convey information to the general public.

Riojans, Aragonese and Madrid are the Spaniards with the most knowledge

The study allows us to know the data for the autonomous communities, although they are influenced by the demographic and socio-economic variables of each region. The Bank of Spain finds that financial knowledge follows an inverted U-shape across generations, with young people and older people having the lowest number of correct answers. For this reason, regions with the youngest or oldest people stand out for having more or less financial skills.

Thus, the regions with the highest average number of correct answers La Rioja – 59%; and Aragon and the Community of Madrid, with 58%. In contrast, Extremadura (44%), Castile-La Mancha (48%) and Asturias (51%) have the lowest percentage on average of the three responses.