Financial Literacy Gaps and Their Effect on Wealth Accumulation: A Cross-National Empirical Review

Abstract

This study examines the causal link between insufficient financial literacy and the accumulation of household wealth, using a panel of 42 economies that includes developed, emerging, and low-income nations. Data from the Standard & Poor's Global Financial Literacy Survey, the World Bank Global Findex Database, and the OECD/INFE Financial Literacy Survey (2015–2024) are analyzed through fixed-effects panel regressions, instrumental variable estimation, and mediation analysis. These methods help clarify the specific pathways by which gaps in financial knowledge lead to reduced savings, suboptimal investment decisions, higher debt levels, and inadequate retirement planning. The results indicate a statistically significant and economically substantial penalty for low financial literacy across all income categories. On average, the wealth disparity between households in the top and bottom quartiles of financial literacy amounts to 38.4 per cent of net household wealth. Importantly, the severity of this penalty is moderated by factors such as institutional quality, the availability of digital financial infrastructure, and specific financial education programs. The discussion considers relevant policy implications in the context of the G20 Financial Inclusion Framework and the UN Sustainable Development Goals.