Indeed, it is unrealistic to expect every American to possess sophisticated financial knowledge. Still, it is broadly agreed that Americans should have at least basic financial knowledge so they can make fruitful decisions. How proficient are Americans in terms of financial literacy? Do most Americans understand basic concepts of finance?
It turns out many Americans aren’t financially literate. And they’re stressed about it. In fact, a 2018 FINRA study found financial capability, stability, and confidence aren’t improving. Over 53% of adults say thinking about their financial situation makes them anxious.
If consumers are doubting the effectiveness of financial literacy courses, they can advocate for industrywide changes that can help steer them toward better financial decisions. "In the end, our financial system is something that we've created.
43 percent earned financial literacy scores of 3, meaning they answered all questions correctly. 36 percent received scores of 2. However, another 21 percent of respondents got only one or zero questions correct. In 2016, the average score across all U.S. households was 2.2. What factors can explain the variation in financial literacy scores?
Americans are struggling to manage their finances. Only 57% of adults in the United States are financially literate, according to the Milken Institute.
On average, 52 percent of adults are financially literate, and the understanding of financial concepts is the highest in northern Europe. Denmark, Germany, the Netherlands, and Sweden have the highest literacy rates in the European Union: at least 65 percent of their adults are financially literate.
1 in 5 teens lacks a basic foundation to build on for financial literacy. According to a 2015 PISA Study, 22% of teens lack a foundation in basic financial skills.
In the U.S., 34% of individuals can answer four or five questions on a basic five-question financial literacy quiz correctly.
The United States ranks 14th in the world in financial literacy.
8 in 10 Americans have some form of consumer debt, and the average debt in America is $38,000 not including mortgage debt. Owing money just seems to be a way of life for Americans, as collectively we have $14 trillion in debt.
Why isn't personal finance taught in school and why don't all students have access to personal finance coaches before they take out student loans? The answer is a mix of inertia in the system and a failure to recognize financial literacy as one of the core skills needed to succeed in the 21st century.
People don't understand things like the stock market, mutual funds, index funds or compound interest in general. The average person doesn't keep a budget, and they overspend on a daily basis.
All told, a new study, which was released today, estimated that nearly two-thirds of Americans couldn't pass a basic financial literacy test, meaning they got fewer than four answers correct on a five-question quiz.
What Does the Scores Mean: Students must earn 66% to pass the W! SE Personal Finance Certification test.
Financial literacy skills means having the confidence, knowledge, and skills needed to make financial decisions that promote financial self-sufficiency, stability, and well-being.