The Financial Literacy Crisis
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. One study found that, when asked five basic questions about finances and the markets, 61% of Americans were unable to answer more than 3 correctly.¹
The study also found that 18% of Americans routinely spend more than their household income and one-in-five have overdue medical bills.
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 financial knowledge is what has been called the “Lake Wobegon effect,” the idea that we all consider ourselves above average. 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.²