Financial Literacy Survey Shows Our Weaknesses
The National Foundation for Credit Counseling reported results from its annual survey of consumer financial literacy recently, and the findings suggest that, as a nation, we’re still not as well equipped to deal with financial stumbling blocks as we need to be.
Specifically, the survey revealed the following about American consumers:
- 26 percent of survey respondents reported spending more than they did last year, a percentage higher than it has been for two years. While this could be good for the nation’s economic recovery, it’s only one part of the puzzle.
- More than 40 percent of respondents graded themselves as earning a C or lower in their personal finance know-how. This is alarming but not surprising: in more official tests of financial literacy (often given to high school students), it’s often common for the majority of students to fail.
- While more than two-thirds of Americans reported paying for most purchases with cash or debit cards, 40 percent still reportedly carry revolving debt on their credit cards from month to month. This sort of behavior can be dangerous and debilitating, especially if a consumer is hit with unexpected job loss or income reduction. In fact, one of the most commonly cited factors for bankruptcy filings is overextension on credit.
- More than 80 percent of the those polled apparently voiced the opinion that walking away from a mortgage can be justified in certain circumstances, particularly if the borrower was misled at the time of the loan or if the borrower can no longer afford mortgage payments. If many people get a chance to act on these beliefs, the effect on the housing market could be seriously detrimental, especially during a period of recovery.
Why Does Financial Literacy Matter?
The issue of financial literacy education has been a hot one in recent years, ever since the bubble in the housing market burst and the abuses (by lenders and borrowers alike) came to light.
Since the beginning of the Great Recession, we’ve seen legislation like the Credit CARD Act to improve the transparency of credit products for consumers, the creation of the Consumer Financial Protection Bureau, and proposals to change debit card fees and other consumer credit products.
When the Bankruptcy Abuse Prevention and Consumer Protection Act took effect in 2005, one of its provisions was the introduction of a Debtor Education (also called a Financial Management) course for all bankruptcy filers – the idea was that those who filed for bankruptcy could certainly benefit from a little guidance on financial matters. And the idea seems to be a good one.
But what about those who aren’t ready to file for bankruptcy? Luckily, the U.S. Government has set up a financial literacy destination, MyMoney.gov, for people who have never set foot in the bankruptcy court.
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- Students & Parents Need Financial Literacy Lessons
- Choosing Your Card Wisely to Protect Yourself from Fraud
- Consumers May Gain From Lower Credit Card Swipe Fees
- Checking in on the Credit CARD Act
- Are Credit Card Companies Evil?
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