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10 Eye-Opening Financial Literacy Statistics
The data is clear. Americans have a financial literacy problem.
Fortunately, there’s also reason for hope. People want to make smart financial decisions — even if they can’t always do it. They understand the importance of financial literacy to create success and financial stability.
We reviewed the latest reports to better understand the state of financial literacy in America. The statistics that emerged offer a glimpse into how well-equipped we are as a country to manage our money. Some speak to our understanding of personal finance, others to how well we follow through on them.
It’s important to note that a majority of these studies were conducted prior to the coronavirus pandemic. A lot has changed, but the data offer a snapshot of our financial health, and how well prepared we were to weather what has become a historic economic crisis.
Here are 10 statistics that illustrate the state of financial literacy in America.
No. 1: 53% of adults are financially anxious
It turns out many Americans aren’t financially literate. And they’re stressed about it.
In fact, a 2018 FINRA study found financial capability, stability, and confidence aren’t improving. Over 53% of adults say thinking about their financial situation makes them anxious. Forty-four percent say discussing their finances is stressful.
Younger Americans are feeling the greatest burden. The study found persisting and widening gaps between those who are struggling and those who are prospering financially — skewing generationally. Those between the ages of 18 to 34 have the highest levels of financial stress (63%) and anxiety (55%).
The study was conducted during a period of economic growth and declining employment — two factors heavily impacted by the current pandemic. It’s likely that these figures have only grown worse.
No. 2: Two in three families lack an emergency fund
According to an analysis from JPMorgan Chase, a majority of families in the U.S. don’t have enough money saved in an emergency fund.
The research recommends families aim to save at least six weeks of take-home pay. This is a departure from the traditional recommendation of saving three to six months’ worth of take-home pay. The reasoning is that a smaller buffer can help families weather a financial upset, such as a reduction of wages or a spike in expenses.
Even so, about two-thirds of American families would struggle to come up with the equivalent of six weeks’ savings. A tremendous percentage of the population is at risk. With financial ruin one unexpected expense away, this statistic emphasizes how critical building an emergency fund is for long-term financial health.
No. 3: 78% of adults live paycheck to paycheck
According to a 2017 CareerBuilder survey, the majority of the country is living paycheck to paycheck. Living paycheck to paycheck means you are spending most or all of your monthly income on expenses. Once essentials are paid, there’s no money left over for savings.
Americans stuck in a hand-to-mouth cycle often feel limited by their financial situation. If savings run out, what’s their Plan B? For many Americans, there isn’t one.
We’re seeing this play out across the nation. Given the current economic downturn due to the pandemic, the number of Americans struggling to make ends meet is likely exacerbated. Jobless claims now total 33.5 million Americans. At a time like this, the stark statistic hits close to home.
No. 4: Three in five adults don’t keep a budget
In 2019, a survey revealed two in five U.S. adults said they have a budget and follow it to keep track of spending. But the survey also revealed three in five U.S. adults self-reported that they do not budget.
Maintaining a budget is a financial literacy fundamental. A budget sets the foundation for how to treat income and expenses. It ensures that needs are covered each month — essentials, like bills, debt, and savings.
It’s eye-opening to learn a majority of Americans abstain from this financial literacy basic. Without a budget how do consumers maintain confidence in their financial stability? How do they hold themselves accountable when managing money?
No. 5: Four in five youths failed a financial literacy quiz
According to a study by FINRA Investor Education Foundation, there is a clear trend of declining financial literacy. On average, young Americans couldn’t answer a majority of financial literacy questions correctly.
People ages 18 to 34 years old had the most significant drop in ability to answer financial literacy questions correctly over several years. In contrast, participants 55 years of age and older performed better than in previous years.
If anything, the data provides a strong case for youth financial education. The widening gap between younger Americans and their older counterparts, is only one aspect of the divide — not taking into consideration socioeconomic status, race, and gender.
No. 6: 27 states scored a C, D, or F for high school financial literacy
Research shows states requiring students to take and pass a personal finance class, produce more informed, college-ready students. Personal finance education during formative years provides students with the knowledge and skills necessary to manage their finances and increase their financial well-being.
In 2017, a national report card highlighted a discrepancy in the way states handled high school financial literacy across the country. In fact, 27 states received grades of C, D, or F for subpar efforts.
A 2020 survey of the states shows hope, but we still have a long way to go. Forty-five states now include personal finance education in their K-12 standards. But don’t celebrate yet.
- Twenty-six states and D.C. do not require a high school personal finance course to be offered.
- Twenty-nine states and D.C. do not require the high school course to be taken.
- Forty-five states and D.C. do not require standardized testing.
Treating personal finance as optional robs students of the opportunity to increase their financial knowledge. That’s why experts are fighting for these courses to be mandatory across the nation.
No. 7: 54% of millennials are concerned about student loans
In 2020, student loan debt reached a record high of $1.56 trillion. And it’s crippling young Americans. Further, these debt obligations heavily impact Millennials’ views of financial success.
When asked about their ability to repay, more than 54% of Millennials expressed concern, according to the Global Financial Literacy Excellence Center. It will take a lot to solve the current student loan debt crisis, but millennials don’t need to worry.
Student loan borrowers have options to ease the burden. If you are a student loan borrower, look into student loan refinance, consolidation, and loan forgiveness. And make sure to take advantage of the current federal student loan forbearance.
No. 8: 60% of adults had credit card debt in the past year
Americans owe a record high in credit card debt, topping $1 trillion, according to the Federal Reserve Bank. And it’s hitting young people especially hard.
In fact, 10% of consumers ages 18 to 29 have credit card debt that is over 90 days late. Creditors report an account as delinquent once it reaches 30 days past due. So 90 days past due is marked as a serious delinquency.
Further, six out of 10 U.S. adults had credit card debt in the past year. And nearly two in five indicate that they carry balances from month to month, resulting in interest and late fees.
Credit card debt is dangerous because the high interest rates and low minimum payments can lead to a vicious cycle of debt.
No. 9: Four in five adults experience barriers to homeownership
Homeownership is a financial milestone — touted as a pillar of the American dream. But four out of five U.S. adults will experience financial barriers when trying to purchase a home.
Compared to last year, slightly more people are facing obstacles to homeownership. In fact, as many as 50% of Americans 18 and older have encountered setbacks.
The top five barriers to homeownership include, but are not limited to:
- Rising home prices.
- Lack of savings for a down payment or closing costs.
- Pre-existing debt.
- Influx of adults to expensive cities, thus limited housing options in price range.
- Poor credit history or score.
No. 10: Fewer than one in five adults is confident in savings
Working Americans struggle to set aside money to fund short- and long-term goals. And if they do, is it enough?
According to NFCC’s 2019 Consumer Financial Literacy Survey, it’s not. In fact, fewer than one in five U.S. adults feels very confident about their saving habits. Further, over one in four didn’t feel confident at all. When asked what areas of personal finance worry them, the number one response was retiring with enough money saved. If Americans are concerned about retirement, then why aren’t they saving more?
The answer is prioritization. It’s easy to let long-term savings goals slip in order to prioritize current financial situations. For instance, high expenses, burdensome debt, and stagnant wages are all factors contributing to a lack of retirement savings.
The data doesn’t lie. Americans struggle with financial literacy. And while we’re slowly making progress, we still have a long way to go.