Euro Area Households Flock to Low-Yield Deposits Amid Financial Literacy Concerns

The European Central Bank has warned that euro area households hold a large share of their wealth in cash and low-yield deposits, with Cyprus facing a particular challenge in encouraging longer-term investment.

Cyprus ranks among EU states with the lowest levels of financial literacy, particularly among young people, according to Christodoulos Patsalides, Central Bank of Cyprus governor. He cited an OECD survey showing that 58.8% of young people in Cyprus reached the basic level of financial knowledge, compared with 80.1% of people aged 40-49.

The ECB said around one-third of euro area household financial assets, worth almost €10 trillion, remained in cash and low-yield bank deposits. Around 80% of households did not own stocks or other market-based financial instruments, the ECB said.