Denmark is world-renowned for its production of bacon, children’s toys and a brew marketed as “probably the best beer in the world”, but it is also a global leader in creating financially savvy citizens.
Standard & Poor’s Global Financial Literacy Survey in 2015, the last global survey of its kind, ranked Denmark at the top of the table, alongside Sweden and Norway, with 71 per cent of adults deemed financially literate — beating the UK’s 67 per cent.
More recently, a barometer by the European Union placed Denmark third for financial knowledge out of the 27 member states, while a study by the Organisation for Economic Co-operation and Development (OECD) found Danish teenagers to be the most financially literate when compared with those of 21 other developed countries.
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One of the key aims of the Times Smarter with Money campaign is to boost financial literacy in the UK and encourage more people to invest. So what can we learn from Denmark?
Bringing home the bacon
Danes aren’t just financially literate, they are wealthy. Denmark had the fifth-highest average wealth per adult, according to last year’s UBS Global Wealth Survey, with the median Dane owning $216,098 worth of assets. The UK was eighth, with the average citizen holding assets worth $176,370.
This wealth exists despite a high-tax, high-welfare model where the top tax rate reaches 60.5 per cent (including municipal taxes) compared with 45 per cent in England, Wales and Northern Ireland and 48 per cent in Scotland (although these do not include council tax).
More than 90 per cent of workers in Denmark, including public-sector workers, contribute to a defined contribution pension scheme, according to the OECD. This is where savings are directly invested in the capital markets and the amount you get at retirement depends on how much is paid in and how your investments perform.
While 95 per cent of private-sector workers invest in these types of schemes in the UK, most public-sector workers pay into defined benefit schemes, funded by taxpayers. These schemes guarantee an inflation-linked income in retirement, based on your earnings.
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Some believe the widespread use of defined contribution pensions in Denmark means that Danes tend to have a better grasp of financial markets.
Maria Demertzis, a professor of economic policy at the European University Institute, said: “The creation of institutional investors through pensions is necessary for the creation of big capital markets that can undertake long-term riskier investments.
More than 90 per cent of Danes have a pension invested in the stock market
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“Advancing financial literacy is crucial for allowing consumers to participate in capital markets, aware of the risks and benefits that this means.”
Turning homeowners into bond experts
Denmark’s unique mortgage system also helps to turn homeowners into amateur bond traders.
Unlike the UK system — where buyers typically borrow long-term loans directly from banks with rates fixed for two to five years — homeowners in Denmark get loans through special mortgage credit institutions on terms of up to 30 years. These institutions fund the loans by selling covered mortgage bonds on global capital markets.
Because these loans are directly linked to the underlying bonds, a unique “conversion” opportunity arises when interest rates rise. As rates go up, the market price of the existing lower-rate bonds decreases.
This allows homeowners to buy back their debt at a discount, effectively reducing the total principal amount owed on their property. Because of this incentive, it is common for Danes to monitor bond markets and interest rates regularly, seeking opportunities to “convert” their loans.
In 2022, when interest rates rose, one in five homeowners bought back their loans, some at reductions of up to 18 per cent.
Jesper Rangvid, a professor of finance at Copenhagen Business School, said: “People think about interest rates and financial markets regularly in Denmark. They are regularly talking about whether it is a good time to refinance their mortgage, whether that is at family gatherings or dinner parties.”
Making the numbers add up
Danish financial education starts at a young age. Children as young as seven learn “everyday economy” in maths.
Money lessons will be compulsory in primary schools in the UK from 2028
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Anne Juel Jorgensen, the head of financial confidence for children and young adults at Danske Bank, said: “Primary school children are taught financial education, and being given small mathematical problems related to money.”
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Financial education has been mandatory for students aged between 13 and 15 since 2015 in Denmark, with lessons on budgeting, interest rates and how savings and investments work. It will be compulsory in primary schools in England from 2028, when lessons in mortgages, pensions and budgeting will also become part of citizenship lessons at secondary school.
The Smarter with Money campaign wants to ensure that secondary school students receive at least 15 hours of financial education a year, including lessons in investment.
Danish schools also participate in Penguege (Global Money Week) every March, where maths lessons for students aged between 13 and 15 are dedicated to financial education. Volunteers from local banks also go into schools to explain financial concepts.
Encouraging young earners
There is a culture in Denmark for teenagers to earn and manage their own finances. Jorgensen said: “Most kids in Denmark have their own money and savings accounts, which gives them practice in making these financial decisions from a really early age.”
About half those aged between 14 and 17 have their own ungarbejder — a special teenage part-time job, usually at a supermarket or café. This figure has, however, fallen since 1986, when more than 60 per cent of teenagers had these jobs.
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The Danish government was so concerned about this drop that last year it removed income tax for under-18s, while extending the hours they could work.
Jorgensen believes that the culture of young people having bank accounts that they can control also helps with financial literacy. “Danske Bank has been offering these accounts since the late 1960s,” she said.
Borneopsparing is the Danish equivalent of a Junior Isa, where parents can invest up to 6,000 Danish kroner (DKK) a year for their child from birth, or DKK 72,000 (about £8,400) over the lifetime of the account. Young people can take their cash out as early as age 14, 18 and 21, compared with 18 in the UK.
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Unlike the Junior Isa, though, the Borneopsparing has near universal uptake: four out of five youngsters have one, according to research by Johanna Jost, a PhD fellow at Copenhagen Business School.
Jost believes that this also helps to develop investment habits in Danes from an earlier age. Her research shows a significant jump in the numbers starting to invest at ages 14, 18 and 21, when Borneopsparings mature, with this habit carrying on through adulthood.
Investing for life
According to the official body Statistics Denmark, Danes held an average of about DKK 210,000 in cash savings and bank accounts and more than DKK 200,000 in shares and funds in 2024.
In comparison some 67 per cent of the £103 billion saved in Isas in the UK in the 2023-24 tax year went into cash, while 30 per cent was invested in stocks and shares. The rest was spent on other Isa products, including Lifetime Isas, which allow those under 40 to save for a first home or for retirement.
There has been a particular boom in investing in Denmark, lately, partially due to the success of Danish companies such as the pharmaceutical giant Novo Nordisk, but mainly because of Denmark’s low interest rates over the past 20 years.
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In 2012, Denmark became the first country in the world to have negative interest rates, with Danmarks Nationalbank’s certificates of deposit rate staying at minus 0.65 per cent for five years up to January 2021.
Rangvid said: “Danes saw that money in their bank accounts was not earning anything, so some moved it out and into stocks and funds.”
Some 658,000 Danes (about 13 per cent of the adult population ) now hold Aktiesparekonto — an investment savings account launched in 2019 that is the equivalent of a stocks and shares Isa. They come with a preferential tax rate of 17 per cent on investment returns of up to DKK 174,200. Outside the Aktiesparekonto, Danes pay 27 per cent tax on the first DKK 79,400 earned and 42 per cent tax on returns above that level.
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About four million UK residents hold stocks and shares Isas, about 7 per cent of the adult population, even though these products have been around since 1999. The Smarter with Money campaign wants to grow this to 5 million.
Using the power of technology
Jost believes that Danish financial systems are set up to help the country’s residents stay better connected with their finances.
Denmark adopted its first digital ID system, NemID, now known as MitID, in 2010. The latest version gives citizens access to public financial services such as taxes, as well as private bank accounts.
It also gives you access to pensions through a government portal. The UK had been expected to launch a pensions dashboard in 2024, but it has now delayed until at least October.
Jost said: “I think Denmark is exceptional in how easy its digital financial infrastructure is to use for people. It just lowers the overall barrier for people to understand and engage with everyday financial activities.”