money on your mind

Knowledge is Currency

Lack of Financial Literacy Costs Americans over $9,700 across their Lifetimes

LOS ANGELES, March 31, 2017 /PRNewswire/ — The National Financial Educators Council recently released results of a survey about financial knowledge conducted with 3,006 people in six age categories across the US. People were asked, “Across your entire lifetime, about how much money do you think you have lost because you lacked knowledge about personal finances?”

Respondents estimated that their lack of financial knowledge cost them an average of $9,724.83 (calculated by averaging the total number of respondents choosing each category, using the lowest number in each spread).

$0-$999

36.28%

$1,000-$4,999

15.32%

$5,000-$14,999

13.68%

$15,000-$29,999

10.22%

$30,000+

24.52%

View complete survey results here.

Given that 240 million adults live in the country, these survey results illustrate that lacking financial knowledge would cost Americans collectively more than $2.3 trillion dollars over a lifetime.

Reported lifetime losses over $15,000 were reported by 1 out of 3 respondents, and nearly 1 in 4 people reported losses over $30,000 due to a lack of financial knowledge. Respondents in the 55 – 64-year-old category estimated experiencing the highest losses, with 41.5% believing they had lost $15,000 or more.

Respondents who estimated their losses at $30,000+ broke down by age as follows:

18 – 24

15.8%

25 – 34

16%

35 – 44

25.4%

45 – 54

28.4%

55 – 64

32.7%

65+

28.8%

The 18 – 24 year olds reported the lowest losses, with 42.5% stating that lack of financial knowledge cost them between $0 and $999.

These survey results represent the first part of a larger research effort aimed at defining risks and costs associated with financial mismanagement. The goal of the initial survey was to gain better understanding of people’s estimates of financial losses they incurred due to their lack of knowledge regarding personal finance.

Lack of personal finance knowledge costs people money: bank fees, interest on credit card debt, higher interest rates on loans, and investment losses are just a few examples. Results of this survey do not capture those areas where respondents lost money, but do not recall or may not even know they lost money.

“People understand that financial illiteracy costs them money; yet judging from test results and research over the last few decades, there has been no significant improvement in people’s financial capabilities. Due to the increased complexity of the economic and financial landscape, possessing the ability to make informed financial decisions becomes increasingly important,” comments the NFEC’s CEO, Vince Shorb.

This survey by the NFEC and collaborators is part of a research series aimed at examining financial attitudes, behaviors and outcomes concerning people’s personal finances. Later studies and results of the national financial literacy test explore relationships between attitudes/behaviors and levels of financial capability.

The National Financial Educators Council is a financial education resource provider, industry advocate, and thought leader. The NFEC conducts financial literacy surveys, studies, and research and hosts think tanks around topics related to financial education. The objective is to gather empirical data to uncover best practices to share with colleagues in the financial education industry.