If you were to take a basic financial literacy test, do you know how well you would score? How confident are you that your financial knowledge is up to speed?
While one might be forgiven for thinking that a lack of financial literacy is exclusively a problem with young people and students, the National Foundation for Credit Counseling’s Financial Literacy Survey revealed that 41% of adults gave themselves a grade of C, D, or F regarding their knowledge of personal finance.
This is an alarming statistic. That’s almost half the adult population who are poorly educated when it comes to managing money.
And it’s not just how to balance your checkbook or set a monthly budget. In a retirement income literacy survey conducted for The American College of Financial Services last year, 80% of the respondents received scores of 60 or lower on financial questions about retirement. Just 20% received what amounted to a passing grade.
Experts are saying that the problem may be with the timing of education. Where previously the bulk of financial learning happened at high school level, the school of thought now is that this is either too early or lacks enough practical real world application for the education to stick.
Which makes sense. Most high school graduates are thinking about what parties they’re going to on their summer break or what college they’re about to attend. Why on earth would they have any use for mortgage information, understanding their employer-matched 401k, or what the best way to set up a retirement savings fund would be?
The key is making it an ongoing educational process, with an ever-increasing capacity for financial concepts, and raising one’s financial IQ.
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