In 2005, we featured an article in the ClientTell about financial literacy in high school seniors. In case you don’t remember the details, the study in 2004 indicated high school seniors scored 52% on a financial literacy test. In a 2012 study, the Financial Industry Regulatory Authority (FINRA) shows financial literacy in young adults may be even worse, and financial practices among all age groups are dismal.
FINRA’s test consisted of five questions on everyday personal economics, such as interest rates and mortgages. On this test, adults age 18-34 scored a 46%. In comparison, people age 55+ scored a 66%. The test also revealed higher financial literacy among men, people making more than $75k per year, whites and Asians, and college graduates.
Other findings of the study include:
- 41% spend less than their income.
- 24% have taken a loan or hardship withdrawal from their retirement account in the last year.
- 21% have been late with a mortgage payment in the last year.
- 22% occasionally overdraw checking accounts.
- 26% have unpaid medical bills.
- 46% of Americans do not have a “rainy day fund,” or three months living expenses set aside.
- 59% have not even tried to determine how much they will need for retirement.
- 34% with dependent children are saving for college tuition.
- 35% have investments outside of retirement accounts.
- 50% have consulted a financial professional in the last five years.
- 65% of homeowners have a mortgage or home equity loan.
- 59% of credit card holders accrue interest and/or fees.
- 20% have student loans, and 54% are afraid they will not be able to pay them off.
- 80% have at least one type of debt, and 42% are concerned about being too in debt.
- 60% say they have never been offered a financial education.
- 89% think financial education should be taught in schools.
Respondents were asked to assess their own level of financial knowledge. Interestingly, about 73% gave themselves high marks, despite the quiz indicating otherwise. About 76% of respondents also think they are good at dealing with day-to-day financial matters, although the survey of financial practices shows what a small percentage actually engage in financially sound habits.
See the complete study – FINRA – Financial Capability in the United States