Read the FINRA 2012 Report on Financial Literacy
In May, 2013, the FINRA Investor Education Foundation published a report entitled Financial Capability in the United States: Report of Findings from the 2012 National Financial Capability Study. The report was based in a survey of 25,000 American adults with respect to measure and draw conclusions about their personal financial capability.
The results confirm the Center’s contention that there needs to be an emphasis on financial literacy education in this country which is at the core of the Center’s mission.
In a five (5) question survey, only 14% of respondents were able to answer all five questions correctly and 39% were able to answer at least four questions correctly.
What is interesting is that despite these relatively low levels of financial literacy as measured by the quiz questions, Americans tend to have positively biased self-perceptions of their financial knowledge. When asked to assess their own financial knowledge, nearly ¾ of respondents (73%) gave themselves high marks (5 to 7 on a 7-point scale where “1” = very low and “7” = very high.) Self perceptions of financial knowledge have become more positive relative to the 67% who rated themselves highly in 2009. This is a serious disconnect.
The survey also included new questions that asked whether respondents had been exposed to financial education. More than one-quarter of respondents (29%) report having been offered financial education at a school, college or workplace, and 19% say they participated.
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Was financial education offered by a school or college you attended, or a workplace where you were employed? |
Total |
|
Yes, but I did not participate in the financial education offered |
10% |
|
Yes, and I did participate in the financial education |
19% |
|
No |
60% |
|
Don’t know/No answer |
11% |
On the surface, exposure to financial education appears to be associated with performance on the financial literacy quiz questions. Respondents who stated that they participated in financial education score higher than those who were offered but did not participate, who in turn score higher than those who were not offered financial education. It is important to note that these findings do not imply a causal relationship between financial education and financial literacy, and may be entirely attributable to differences in education, employment and other demographic factors. This represents a potentially interesting area for further exploration and analysis of the data.
When asked whether they thought financial education should be taught in schools, an overwhelming majority of respondents said yes.
Conclusion
A few years have elapsed since the financial crisis of 2008, the bursting of the housing bubble and the Great Recession. There are some signs of recovery in this study’s measures of financial capability, but there is also clear evidence of the medium-term effects of economic shock. More U.S. adults in 2012 are able to pay their bills without difficulty than in 2009 and more have put aside short-term emergency funds. But fewer have investments in retirement accounts and more have recently experienced foreclosure or bankruptcy.
Looking ahead, it is concerning that basic financial literacy levels remain so low, because individuals and families must make many decisions—some more complex than others—that will affect their financial well-being in both the short-term and long run. The “balance sheet” challenge of managing the burdens of household debt while also preparing for the financial needs of one’s retirement years can be stressful even for those who are highly financially capable. This challenge may be especially difficult for the younger generation of American adults, whom this study shows to be at a pronounced disadvantage on nearly all measures of financial capability. Ensuring that citizens have access, from an early age, to adequate informational resources, affordable financial services options and appropriate consumer protections should be a high priority for policymakers and for society as a whole.
A more financially capable population can result in a larger and more efficient market for financial products, greater participation in asset building and greater financial stability. It is therefore in everyone’s interest that action be taken to improve the financial capability of all Americans.
That is the mission of The Center for Ethics in Financial Education as we must reverse this trend. To see the entire report, please go to…
https://www.usfinancialcapability.org/downloads/NFCS_2012_Report_Natl_Findings.pdf