The U.S. has a financial literacy issue, and the problem is both deep and potentially highly damaging to the U.S. economy, financial experts say.
The literacy challenge is worse than you might think. A brand new report out from the FINRA Investor Education Foundation states that two out of three U.S. adults "lack financial literacy" and that only 37% of Americans could pass a basic economic/financial knowledge test.
More bad news, as FINRA is just getting warmed up. This from the study:
- 18% of respondents spend more than they earn
- 21% have overdue medical bills
- 26% have used non-bank borrowing (such as high-interest payday loans or pawn shop loans)
- 32% only pay the minimum due on their credit cards
- 9% are underwater on their home mortgage
- Less than half (46%) have a "rainy day" fund set aside for financial emergencies
- Only 35% perform research or compare offers when shopping for credit cards
Gary Cardone, CEO of eConsumerServices, a dispute mediation firm, says he finds the study results troubling, "particularly with some analysts predicting the United States has a 60% chance of entering another recession within the next year."
"It's critical for consumers to have basic understanding of personal finance," Cardone says. "Those who don't often end up mired in debt, paying exorbitant interest fees, facing emergency expenses without a savings cushion or even filing for bankruptcy. Ideally, high schools should require students to complete financial literacy education to ensure they are prepared to make responsible financial decisions regarding credit, loans and savings when they graduate. But it's never too late for adults to brush up on their financial knowledge."