Financial Literacy in America
Financial literacy is not something that should be taken lightly. Everyone should have at least a basic knowledge of financial issues, as it affects our everyday lives significantly. It is not isolated to any particular education level or income bracket that is not up to speed with how finances work. Just because you have a bank account doesn’t necessarily mean you know how to balance a checkbook.
In the United States, the S&P Global FinLit Survey by the World Bank, Gallup, and George Washington University found that only 57% of Americans are financially literate. Even worse, according to FINRA Investor Education Foundation, two out of every three adults in the U.S. "lack financial literacy" and that only 37% of Americans could pass a basic economic/financial knowledge test.
FINRA had even more alarming results from their study. The results show that 18% of those surveyed spend more than they earn. This has a trickle-down effect as 26% have used non-bank borrowing where a person finds themselves borrowing from high-interest payday loans or pawn shop loans. Not a great position to be in at all, especially when they have to pay the loans back with large interest payments on top of the loan. It is no wonder then that the study found 9% are underwater on their home mortgage payments.
It is incredibly important to increase one’s financial literacy and take control of your finances. As the saying goes “knowledge is power,” and without the knowledge of how your money works for you and how to budget and balance your earnings and your expenses, you are setting yourself up to fail.
Learning more about interest rates and investments can only help you and your loved ones in the long run and most definitely in the short term. Your day-to-day existence is governed by what you spend your money on and where you go and what you do. Money may make the world go around, but you can control your money and thereby your life in the world.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC