The Scary State of Financial Literacy in America

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Apr. 6, 2011 - St. Paul, MN, U.S. - RENEE JONES SCHNEIDER Ã?Â¥ reneejones@startribune.com.St. Paul, Minn. - 4/6/11 - GENERAL
Renee Jones Schneider/Minneapolis Star Tribune/Zumapress.com/Alamy

Only 40 percent of adults keep a budget and track their spending. Three-fourths of American families say they live paycheck to paycheck. More than one-fourth of American families have no savings at all. These troubling statistics are some of the reasons that we need to boost financial literacy.

Being financially literate means you understand how to manage money, how money works in real-world applications, and how you can use money as a tool to help others and grow your own stability and security. Studies from organizations like the Jump$tart Coalition indicate that the average American doesn't have enough financial education -- or at least doesn't understand how to apply this knowledge in the real world.

A Lack of Financial Literacy Creates a Big Problem

This has serious consequences. Look at our consumer debt problem. Collectively, American consumers owe $11.52 trillion to lenders and creditors. This debt burden balloons year after year. Last year alone student loan debt soared by more than 11 percent. The result is that many Americans fear for their financial stability and freedom. Only 50 percent of American families have more than three months' worth of expenses saved. Nearly as many –- 43 percent –- are concerned that their savings won't be enough to cover unexpected costs or emergencies.

Americans feel uncertain about their ability to retire -- and for good reason. Statistics compiled by LearnVest and Chase Blueprint show what Americans, divided by age group, have saved for their retirement. For those 45 to 54, the median saved was only $101,000. It's no wonder that 38 percent of adults are concerned about being able to retire on time, if they'll be able to retire at all.

The good news is that efforts to raise awareness for financial literacy seem to be working. Three-quarters of American adults would like help with basic money matters and would appreciate the advice of a professional.

Most adults wish they had financial coursework. Only 5 percent say they were taught about money by a teacher, and 40 percent say they would give themselves C's, D's and F's on their grasp of personal finance concepts. A full 85 percent of American parents believe that financial education courses should be a requirement for high school graduation. And 52 percent of teenagers want to learn more about money, and they're most interested in budgeting, saving and investing.

What You Can Do Today to Increase Your Financial Literacy

We may be a long way from seeing approved financial education classes in public schools, but a wealth of information is available online. You can become more financially literate, and more prepared to deal with your finances, if you're willing to do a little research.

  • Get your finances in order. It's hard to know where to go if you don't know where you're starting. Make a budget and track your spending; cut frivolous expenses and make sure you're money is going to things you truly value (and not stuff you think you have to have because everyone else does).
  • Make a plan to pay off any student loans or credit card debt and try to max out your retirement contributions if you can. Even if you can't make that happen today, it's a great goal to set for yourself –- and goals help keep your finances on track.
  • Keep up the savings and investing habit once you've established it. And don't stop learning. By continuing to educate yourself, it will be easier to build financial security for you and your family.

Sophia Bera is a financial planner for Millennials and the Founder of Gen Y Planning. You can sign up for her newsletter here to receive more money tips for Millennials.


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29 Comments

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Jive Turkey

The only thing you need to know in America in regards to financial literacy is the fact that our entire economy and monetary system are based completely on deception and fraud. Everything else is just smoke and mirrors. Our leaders tell us we've got to get out of debt, then they tell us we can do this, by borrowing our way out of debt. WOW! What else do you need to know?

April 20 2014 at 12:43 AM Report abuse rate up rate down Reply
Iselin007

Keep air brushing the BLS data .

April 20 2014 at 12:34 AM Report abuse rate up rate down Reply
Iselin007

The Red Army must be quaking in their boots knowing they got the manufacturing jobs and your people are flipping burgers or going out for shopping carts!

April 20 2014 at 12:20 AM Report abuse rate up rate down Reply
Iselin007

The financial reality is you can not support the public sector with crap jobs.

You know they don't know what their doing when they keep raising the age of SSI beneficiaries, not enforcing age discrimination/ ADA laws, and allowing outsourcing.

April 20 2014 at 12:10 AM Report abuse rate up rate down Reply
Iselin007

Those that can afford tutors can better a child's chances of learning what their incapable teacher failed to do.

You know the teacher is scamming you when they give out tests that take up the majority of time they are supposed to be teaching!

April 19 2014 at 11:52 PM Report abuse rate up rate down Reply
Iselin007

The schools have become just a meal ticket for some educators. Now that the fat salaries and pensions are bleeding the declining middle class dry with high property taxes. The states are trying weed out those that are just hanging out or taking up space.

April 19 2014 at 11:39 PM Report abuse rate up rate down Reply
Iselin007

It's hard to look up to anyone for guidance especially after the trade deals caused so much damage to the middle class while driving up the debt. If these people are your friends I would hate to meet your enemies.

April 19 2014 at 11:08 PM Report abuse rate up rate down Reply
kabube

And yet most American families are not nearly so mired in debt as our federal, state and city governments.
t

April 19 2014 at 10:49 PM Report abuse +1 rate up rate down Reply
1 reply to kabube's comment
Iselin007

Reality is because they overpaid their buddies the taxpayers in the private sector absorb their mistakes.

April 20 2014 at 12:43 AM Report abuse rate up rate down Reply
Richard

When three fourths of Americans live paycheck to paycheck all of the financial literacy won't help them. They seem to make it through the week with what little the corporations allow them to have. The remaining quarter that have no savings are probably on public assistance because fast food corporations keep them in poverty.

April 19 2014 at 10:13 PM Report abuse -1 rate up rate down Reply
1 reply to Richard's comment
kabube

Fast food corporations, and the IRS.

April 19 2014 at 10:51 PM Report abuse +1 rate up rate down Reply
sableesp

Too many worthless courses in public schools. To replace 'parroting' of worthless subjects, like the spelling of a dinosaur name; teaching communication, both written & verbal; art & a semester of instrumental instruction, seems valuable instead of "Run, it's tyrannosaurus rex being chased by a mamenchisaurus for it's catch, a cave man!"

April 19 2014 at 9:39 PM Report abuse rate up rate down Reply
1 reply to sableesp's comment
kabube

Poor teachers--can't keep the little ones attention! Plus teachers are forced to teach to the level of the slowest children, and some of those children are stationary. Parents are either unable or unwilling to push their children towards academic success.

April 19 2014 at 10:56 PM Report abuse +1 rate up rate down Reply
1 reply to kabube's comment
Iselin007

Some of these teachers are pushing people out of their communties with excessive pay and benefits.

April 20 2014 at 12:48 AM Report abuse rate up rate down