Imagine driving a car without a basic understanding of the rules of the road, or even how to operate it? Scary thought.
Yet many Americans are operating their personal finances with only the barest minimum of knowledge. When asked five basic questions about finances and the markets, 61% of American got 3 or fewer correct. Only 39% got four or more correct.1
The Consumer Financial Protection Bureau found that approximately $670 million is spent each year on financial education by public, private and non-profit sectors.2 Now this may sound like a sizable sum until you realize that it translates to a little more than $2 per U.S. citizen, per year.
For perspective, the financial services industry spends about $17 billion each year to market products and services to Americans.2
It has been said that knowledge is power, and if that’s true, then too many Americans lack the power to control their financial futures. Success rarely comes accidentally; it is the culmination of a journey whose first steps are in education.
One of the obstacles to increasing the financial knowledge is what might be called the “Lake Wobegon effect,” the idea that we all consider ourselves above average.3 It is a self-assessment that keeps many from learning as much as they need to. But whatever your knowledge level may be, it should be recognized that an ever-evolving financial landscape puts a premium on continual learning.
There is a wide range of resources for individuals who understand that the more informed they are, the better the decisions they can make.
If you are committed to increasing your financial literacy, a good beginning is never being afraid to ask questions of financial professionals. Another good place to start your self-education is on a U.S. Treasury-sponsored website, which was created for that very purpose.4
1 FINRA Investor Education Foundation, 2103. Study participants were asked five questions covering aspects of economics and finance encountered in everyday life, such as compound interest and inflation.
2 Consumer Financial Protection Bureau, November 2013
3 Word IQ, January 2014
4 treasurydirect.gov, 2014
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