- According to a recent study, the proportion of persons who claimed their lack of financial literacy costs them more than $10,000 has increased from 11% in 2021.
- Most survey participants claim that they spent, if any, money at all.
- Advocates claim that data supports the need for personal finance education in schools before pupils enter adulthood and have to make a variety of financial decisions. What you don’t know can hurt you when it comes to financial concerns.
- According to a National Financial Educators Council research, 38% of respondents to a recent survey claimed that their lack of financial literacy will cost them at least $500 in 2022, with 15% claiming that it will cost them at least $10,000. This is an increase from 11% in 2021.
The bulk of respondents (68%) claimed that lack of financial literacy cost them between $0 and $499.
According to the poll, which was carried out from October 23 through December 5 among nearly 3,000 persons nationwide, the average price was $1,819. This amount in 2022 is almost $500 more than the average of $1,389 in 2021.
“A lot of individuals come out of [school] not having been taught financial literacy in any detail,” claimed certified financial planner Denis Poljak
Adults in the United States lack a lot of financial literacy.
Numerous U.S. citizens lack financial literacy, which is commonly defined as knowing financial concepts such as income, budgeting, saving, and making investments as well as how interest rates operate and why credit scores matter.
For instance, adults in the 2022 TIAA Institute-GFLEC Personal Finance index, the sixth annual gauge of financial literacy, correctly answered, on average, 50% of the 28 fundamental money questions. Even worse, the percentage of respondents (23%) who were unable to accurately respond to more than seven questions is higher than it has ever been in the survey’s history.
The issue, according to experts, is that ignorance may have an impact on everything from how much money you save — whether for long-term goals like retirement or for emergencies — to how much debt you take on and for what purposes.
You may have to make some significant financial decisions before you reach maturity or shortly after. Just a few examples include choosing how to pay for education, controlling a credit card or auto loan, raising your credit score, paying taxes, and beginning to save for retirement even though it’s decades away.
A crucial component in the toolkit is financial literacy.
Financial literacy proponents contend that instruction must begin before teenagers graduate from high school. As to the nonprofit Council for Economic Education, as of last year, 24 states required personal financial instruction by grade 12.
For instance, according to Morrison, if you are familiar with personal finance, you’ll probably have higher credit scores and be less likely to fail on a loan. That is supported by a 2015 research by the Investor Education Foundation of the Financial Industry Regulatory Authority:
The FINRA foundation’s most recent financial-capability study also revealed that in 2021, people with scores over the median on a seven-question financial understanding quiz were more likely to be able to support themselves. In particular, they had greater levels of three months’ worth of emergency money (65% against 42%) and spent less than their income (53% versus 35%).
According to the study, they were also more likely to have estimated their retirement savings requirements (52% versus 29%) and to have started a retirement account (70% versus 43%).
