Dating back to the financial crisis, there was a need for a greater understanding of where the US is on the spectrum of financial literacy. In 2009 a study was conducted to begin assessing financial literacy. It consisted of a fairly lengthy survey about people’s financial lives as well as some quiz-style questions about finance. It’s the most comprehensive study of its kind that I’m aware of. This study was updated and conducted again in 2012, and the report is now available.
The results were not great. Below are some charts showing peope’s responses to some of the survey questions. Tomorrow, we’ll look at how we did on the quiz.
This is a group generally referred to as the “unbanked”. Depending on how you measure this population it could be a bit bigger or smaller than this population. It can be people that don’t trust banks, or cannot have accounts due to residency or legal status. For people with bank accounts this number is often seen as high.
At first glance this looks like a positive number. Over 3/4 of people do not regularly overdraw their bank accounts. But think about it from the other side. More than 1 out of 5 people do regularly overdraw their accounts.
Great news! 49% of respondents do have retirement plans through employers. 45% do not of course. But the really scary thing is 5% of respondents just don’t know. How do you not know?
This is a huge red flag for the future. Sure almost 50% of people have a retirement account through work. But here we see 70% of people do not have one set up outside of work. People on top of their finances know that a company provided 401k isn’t going to cut it, you need more savings than that. This is especially true if your company plan sucks.
54% of people that have student loans are worried they won’t be able to pay them off. A small portion is thinking this because they currently don’t have a job. But my guess is most are worried because whatever they borrowed money to learn about doesn’t have a great return on investment. I’d be willing to be for the next few years this number will grow.
Not much to say here, it’s great that 2/3 of people don’t have an auto loan. That sounds like a good number.
22% of people have between 4 and 8 credit cards? Wow. I prefer to keep one card and can see the advantages of perhaps one more, but it’s clear there’s a large group of people that will open a new credit card to save 20% on their purchase that day.
Considering how depressing the results of the survey were, I think it’s a good sign for the future that almost 90% of people think financial education should be taught in schools. Only one question, what’s the reasoning for the 5% that don’t want it taught?
Ahahah! 73% of people think they have a high level of financial knowledge. As you’ll see in tomorrow’s post, this number should be closer to about 25%.