Financial Literacy Stills Needs Improvement
A big problem for people today appears to be the inability of most to perform basic financial calculations or understand basic investment principles. Workers and retirees have increasingly been asked to take on an unprecedented degree of responsibility for their retirement and other savings, as defined benefit pensions decline, and government programs face insolvency in one country after another.
As a result, consumers now confront a bewildering array of financial decisions and a wide range of financial products from 401(k) plans and Roth IRAs to regular Individual Retirement Accounts, phased withdrawal plans to annuities, and many more. This process implies that it is becoming ever more important for households to acquire and manage economic know how.
Economists have undertaken several recent studies of financial literacy in the United States. For instance, a survey conducted for the National Council on Economic Education (NCEE) by Harris Interactive in 2005, indicated that nearly all U.S. adults believe that it is “important to have a good understanding of economics.”
The Organization for Economic Cooperation and Development (OECD) released the results of an international survey of financial literacy, and they are, by all accounts, dreadful.
Only about 10% of students in the United States can look ahead to solve financial problems or make the kinds of financial decisions that will be only relevant to them in the future. This means that a very small percentage of Americans can assess the potential outcomes of financial decisions.
Overall, The United States placed 9th in financial literacy, behind China, Australia, Poland, and others. [3] The link between financial literacy and responsible economic behavior is quite obvious, but it bears repeating. If we are to live financially secure lives and enjoy a good quality of life with sound investments and financial well-being, then financial education is an absolute must.
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