Key Takeaways
- More than half of the U.S. population is not financially literate.
- Misunderstandings about money and mistrust in financial institutions is costly to consumers.
- Money skills are often not taught at home, and some populations are at greater risk.
- Schools are being mandated to teach personal finance, but not all are participating equally.
Understanding core personal finance concepts like cash management, bank accounts, credit, taxes and investing is important. With that knowledge, people can make decisions that benefit their current budget and help with future goal achievement. When they have low financial literacy levels, though, people tend to overpay and undersave.
A 2023 survey conducted by the National Financial Educators Council found the estimated average amount of money lost due to lack of financial knowledge was $1,506 per respondent.
Although strides have been made, most Americans still have trouble with key financial subjects. The TIAA Institute-GFLEC Personal Finance Index shows alarming data in its 2023 report. On average, U.S. adults correctly answered just 48% of the index’s basic money questions.
Here’s why financial literacy remains low, which communities are most affected and how to address the gap.
Financial Skills Aren’t Always Taught at Home
As they grow, children absorb information through observation, conversation and action. While living at home, they may see their parents do everything from comparing prices of consumer goods at the supermarket to sitting down at the computer to pay bills.
While some parents explain what they’re doing and show how to best spend, borrow, save and invest, then gradually integrate the kids into the process, many don’t.
Annamaria Lusardi, senior fellow at the Stanford Institute for Economic Policy Research and director of the Financial Freedom Initiative, says the spread of knowledge is not equitable, and certain home-based lessons can actually do harm.
When parents have low financial…
Read the full article here
