Financial Literacy Survey Finds Knowledge Gaps in Basic Money Skills
The National Foundation for Credit Counseling’s 2014 Financial Literacy Survey revealed significant gaps in personal financial knowledge in the areas of budgeting, saving, and understanding credit reports and credit scores - all key areas related to successful money management.
The survey, conducted online in March, polled more than 2,000 U.S. adults over the age of 18. Here are some of the findings:
Budgeting and debt - Sixty-one percent of U.S. adults, the highest percentage in six years, admit to not having a budget. Financial experts generally agree that a budget is a basic tool of financial management, and without it, a person can more easily lose track of spending. Nonetheless, consumers appear reluctant to utilize this tool, which could explain why about one in three adults (34%) indicated their household carries credit card debt from month-to-month, with 15 percent, or more than 35 million people, admitting to rolling over $2,500 or more monthly.
Savings versus spending – When asked which areas of personal finance are most worrisome, the top concerns were evenly divided between insufficient “rainy day” savings for an emergency (16%) and retiring without having enough money set aside (16%). However, the proportion of adults who are spending less when compared to the previous year continues to decline, from a high in 2009 of 57 percent, to a low in 2014 of 29 percent. This suggests that, although consumers are uncomfortable with their lack of savings, they may have nonetheless continually increased their year-over-year spending.
Credit Reports and Scores - Most adults have not reviewed their credit score (60%) or their credit report (65%) within the past 12 months. Close to one in four adults who did not order their credit report in the past 12 months (23%) indicated that they already knew their credit score(s), so they didn’t think they needed their credit report(s). Although related, credit reports and credit scores are two very different expressions of a person’s credit. Since each plays a critical role in a person’s financial future, they both merit regular review. A further reflection of the confusion around credit reports and scores is that more than half of all U.S. adults (54%) mistakenly believe that a standard credit report typically contains a person’s credit score(s).
Knowledge of personal finance – Forty-one percent of adults gave themselves a grade of C, D or F on their knowledge of personal finance. Therefore, it is not surprising that, when asked what their money would say to them if money could talk, about one in five (21%) thought it would say “I’m smaller than most of my friends.” Curiously, about one in five (21%) also thought their money would say “I feel loved and nurtured.”