The Future of Financial Literacy
Neil Bansal shares a post that explores the lack of financial literacy in the US, and asks what can be done about it.
So how would you rate your financial literacy? If someone asked “True or false: buying a single company’s stock usually provides a safer return than a stock mutual fund”, how would you respond?
If you incorrectly answered ‘true’ and neglected how diversification lowers your risk versus a single stock, don’t feel too bad. In a comprehensive 2018 survey by the regulatory organization FINRA, less than half of Americans (43%) correctly answered this question ‘false’. Even fewer (26%) correctly knew that bond prices fall when interest rates rise.
The results of six fundamental questions across economics and personal finance provide a dismal view of financial literacy and a slow but clear decline over time (the survey is repeated every three years). We shouldn’t be surprised by such results. In the same survey only 20% of respondents mentioned participating in any financial education in school or the workplace, yet there is a disturbing gap between self-perceptions and actual financial behaviors and feelings. In the survey when asked “I am good at dealing with day-to-day financial matters, such as checking accounts, credit and debit cards, and tracking expenses”, an incredible 77% rated themselves positively with a 5, 6 or 7 on a scale from 1-“disagree” to 7-“strongly agree”. Within this 77%, almost half gave themselves the highest self-score of a 7 yet nearly a third of this group admitted to costly credit card behaviors such as only paying the minimum balance, paying late fees or even using the card for cash advances!
Other surveys show similar results and get into the emotional toll it is taking on younger consumers. A 2019 Business Insider/Morning Consult poll showed that more than half of all millennials and Gen X respondents were stressed “some” or “a lot” about their credit card, personal loan or student loan debts.
Points included in this article:
- Generational banking
- Financial education
Read the full article, Is Teenage Banking The Path To Greater Financial Literacy?, on CoppertreePartners.com.