Deficits in Financial Literacy Cost Americans a Lot of Money in 2019, Survey Shows

LAS VEGAS, Jan. 8, 2020 /PRNewswire/ -- It's no secret that lack of financial education and knowledge can contribute to people's financial problems. But does it actually cost people money? The National Financial Educators Council (NFEC) conducted a survey asking American adults to estimate how much money they had lost during the year due to lack of financial knowledge. The single-question survey asked U.S. residents across the country, "During the past year (2019), about how much money do you think you lost because you lacked knowledge about personal finances?"

A total of 2,506 people responded to the survey between December 31^st 2019 and January 3^rd 2020. Six different age groups across the U.S. were represented among those surveyed. Among this diverse group of respondents, the estimated average amount of money that lacking knowledge about personal finances cost people was $1,279 in 2019.

Click here to see the complete survey results: https://www.financialeducatorscouncil.org/financial-illiteracy-costs/

If we generalize the above results to represent all of the approximately 240 million adults who live in the U.S., our estimate tells us that, in 2019, lack of financial literacy cost Americans a total of more than $307 billion.

Among those who responded, 17.4% reported incurring financial losses of more than $2,500 in 2019 as a result of lacking knowledge about managing money; and 38.7% reported losses above $500 for the year due to this shortfall in knowledge. The NFEC arrived at this figure by averaging the total number of respondents who chose each category, using the lowest number in each spread.

"Today, Americans must negotiate a financial landscape that's becoming more and more complex. And with recent changes to the tax code and the emerging digital currencies, that complexity is only going to increase," claims Vince Shorb, the NFEC's CEO. "Increasing citizens' access to financial education and improving their ability to make informed financial decisions is more important now than ever before."

This annual survey has now been administered for the fourth year as part of a larger research effort aimed at defining the costs and risks that go along with lack of financial capability. The NFEC collects and analyzes these data to clarify whether and how the financial illiteracy epidemic damages individuals and its potential impact on the overall national economy.

The NFEC asked the same question on a financial literacy survey last year, with similar results: participants indicated an average loss of $1,230 in 2018 versus $1,279 in 2019. 

In previous studies, the NFEC found in 2016 that U.S. adults indicated experiencing average lifetime losses of approximately $9,725, with 1 out of 3 respondents reporting lifetime losses of more than $15,000. Close to 1 out of every 4 people indicated losses of over $30,000 as a result of lacking financial knowledge that helps illustrate why financial literacy is important.

When people don't know enough about managing their personal finances, they face increased risks such as bank fees, high credit card and loan interest rates, and losses on investments. It's also important to note that there may be times when people have lost money due to lack of knowledge, but don't remember or are unaware of those losses; so the survey results probably represent an underestimate of actual losses sustained.

The National Financial Educators Council (NFEC) is a thought leader that provides financial education resources, financial literacy curriculum and advocates for the spread of financial literacy. The NFEC is undertaking research efforts to examine financial attitudes, behaviors, and health across the U.S. and worldwide. Previous studies and results of nationwide financial literacy tests indicate strong correlations between people's financial attitudes and behaviors and their financial aptitude. 

Media contact:
Trevor Stoll  
[email protected]   
702.620.3059 ext. 7000

SOURCE National Financial Educators Council

Related Links

https://www.financialeducatorscouncil.org/