In December 2016, FINRA (Financial Industry Regulatory Authority) released their report, “Investors in the United States 2016”. The results of the study indicated that overall, American investors felt ‘confident’ in the stock market and the economy, but many felt they didn’t have a good understanding of basic investment principals or basic financial concepts.
One of the most serious findings in the study regarding financial literacy was that when asking study participants to answer ten basic questions relating to financial concepts, those that felt confident about their financial literacy scored less than 50%! Those that indicated they were not confident and didn’t understand basic concepts scored slightly worse than the confident investors. This shows that overconfidence doesn’t necessarily mean understanding.
What does that mean for us as a society? Numerous reports indicate that if we don’t teach our children (and Adults) financial literacy, there will be consequences that will hurt our country for years to come. A few key things we need to consider:
Requiring a Financial Literacy Class to Graduate.
Currently, only 17 states require a financial literacy class to graduate from high school (Latest study released in 2016). No states currently require standardized testing of basic financial concepts. Financial literacy experts know that teaching students how to manage their income and expenses and giving them a basic understanding of financial concepts will enable them to have financial successes regardless of their future income.
Credit Scores Improve After a Financial Literacy Class.
Having trained teachers that know financial literacy content help students develop better credit behaviors in childhood. This leads to students that are likely to make on-time payments and understand how to manage debt and credit.
Bring Financial Literacy to the Work Place Improves Participation in Retirement Savings Plans.
When employees are invited to attend workplace classes on budgeting, saving, and investing, they are more likely to save for retirement and not live beyond their means. These classes are commonly conducted by the financial advisor that oversees the company retirement plan, the HR Department, and other financial literacy educators.
What can you do for yourself if you feel you are in need of sharpening your financial literacy? Start by asking questions of a financial advisor or another capable instructor when you don’t understand something. This can include asking CPAs, literacy teachers, and others that specialize in educating with unbiased intentions. It’s up to all of us to improve the statistics we are seeing in our population regarding distressing facts on where we lag in comparison to other countries in financial literacy.