Financial Literacy, How Bad Is It?
10 Aug 2016
There is no question; America has a financial literacy issue. A report from the FINRA Investor Education Foundation says that two out of every three American adults “lack financial literacy” and that approximately 37% of Americans could pass a basic economic/financial knowledge test. More from the study:
9% are underwater on their home mortgage
21% have overdue medical bills
18% of respondents spend more than they earn
32% pay only their minimum balance on their credit cards
Why is this the case? We have more information than ever before; shouldn’t we be smarter? Maybe in reality, that’s the problem. We are bombarded with over-complicated information, and varying opinions from the media.
It was once said “Traditional economic theory suggests that investors are rational decision-makers, carefully weighing all available information to make choices that result in the best possible outcome” (Legg Mason report on behavioral finance). If only this was true and that simple! The reality is Americans and the world for the most part struggle with basic economic concepts and financial terminology. Until this changes I fully expect a continued disconnect from retirement reality and retirement fantasy. We are inspired to continue providing as much education as we can to hopefully see those statistics, provided above, change for the better.