Lack of financial literacy cost Americans $280 billion in 2017
Was one of your New Year’s resolution to better manage your personal finances? How about to put a little extra change into the piggy bank? According to a recent survey conducted by the National Financial Educators Council, increasing your knowledge about financial literacy should be at the top of this year’s resolution list.
In 2017, the NFEC sought to find out how much money people estimated they had lost throughout the year due to lack of financial knowledge. In a one-question online survey, U.S. residents were asked, “During the past year (2017), about how much money do you think you lost because you lacked knowledge about personal finances?”
A total of 1,515 participated in the survey, representing six age groups across the country. Among this diverse group, respondents estimated that lacking knowledge about personal finances cost them an average of $1,171 in 2017. 18% of respondents reported financial losses over $2,500 in 2017, while 41% of respondents reported losses over $500 for the year as a result of lacking knowledge about personal finance. Extrapolated across the 240 million adults residing in the U.S., these results show lack of financial knowledge cost Americans more than $280 billion in 2017.
Deficient knowledge about money management creates risks that can include bank charges, credit card debt interest, high loan interest rates, and investment losses. And because there may be areas where people lose money, but don’t recall or may not even know they lost money, these results probably underestimate the actual losses people sustain.
“Americans today have to negotiate a very complex financial and economic landscape, and given recent changes to the tax code and new digital currency options, that complexity is only going to increase,” said Vince Shorb, CEO of the NFEC. “Improving people’s ability to make informed financial decisions and increasing access to is more important now than ever before.”
Junior Achievement’s Approach
Junior Achievement’s solution to America’s lack of knowledge about financial literacy is to empower young people to take control of their financial futures. Through Junior Achievement’s experiential K-12 programs, students learn early-on what it takes to be financially fit in today’s ever-changing economy.
JA brings volunteer role models and entrepreneurs from the local community into the classroom to share their experiences with young people. Using JA’s proven programs, these volunteers help students better understand how money works.
The JA Finance Park® program in particular has shown a “moderate-to-large” increase in financial knowledge among students who participate in the program, according to an RMC Research Corporation study. Empirical evidence demonstrates that the JA Finance Park curriculum and experience increases the financial capability of students.
Across all programs, research indicates that nearly 90% of JA Alumni are confident in managing their finances. Similar results are reported for former JA students from a variety of grade levels and programs. Junior Achievement is an organization that is at the forefront of the movement to make financial illiteracy a thing of the past.
The National Financial Educators Council (NFEC) is a financial education resource provider, industry advocate, and thought leader. The NFEC conducts survey research and sponsors think tanks around financial education topics, with an overarching goal of obtaining empirical data that illuminate best practices to share with colleagues in the financial education space.