I have found it incredibly depressing how little people know about financial management. I have always found it astonishing that we do nothing to help our children gain the skills and understanding needed to manage their finances.
The SEC just released their study on just how bad things are:
http://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf
This goes along with another SEC article at the end of 2011
http://www.sec.gov/news/studies/2012/917-financial-literacy-study-part2.pdf
(Out of curiosity - how many people know what the safe withdrawal rate is?)
Across the board Bonds are a complete mystery to the vast majority of Americans
-Only 40% of Americans that identified themselves as 'investors' (Not professional investors) could correctly answer 'Would you rather have one million dollars now or one penny that would double in value every day for a month'
-64% of Americans understand how inflation affects prices but only 35% actually know about what the rate is and 28% know how to protect against it
-Jump$art found that financial literacy scores for High School and College students are at an all time low from when the Jumpstart tests started being offered in 1997
(Less than half correctly answered that sales tax will make things more expensive to buy!)
Yet with all of this people are just barely paying attention to the problem. Only 13 states require a personal finance course even though studies have shown a direct correlation between the states that require those courses and the students being more likely save money, less likely to have excessive credit card debt and are more likely to pay bills on time
Few people seem to be talking about educating our kids despite all of the evidence that financial education has a very real effect on their lives. Instead we rely on the illiterate (parents) to teach their kids about money. We hope that the few financially literate will and have the ability to teach their kids about money. We are knowingly continuing to turn out generations of children who will struggle their entire lives with money and end up financially destitute and utterly dependent on SS to survive
I would encourage you to bring up these concerns if you are ever in conversation with a teacher, school official or legislative representative.
The SEC just released their study on just how bad things are:
http://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf
This goes along with another SEC article at the end of 2011
http://www.sec.gov/news/studies/2012/917-financial-literacy-study-part2.pdf
For example, studies have found that investors do not understand the most elementary financial concepts, such as compound interest and inflation. Studies have also found that many investors do not understand other key financial concepts, such as diversification or the differences between stocks and bonds, and are not fully aware of investment costs and their impact on investment returns. Moreover, based on studies cited in the Library of Congress Report, investors lack critical knowledge about investment fraud.
51% of participants in a recent online study understood how and when a financial intermediary receives compensation for sales of investment products in a hypothetical example.
(That would only offer about $1200 a year for 30 years. Raising that to $1800 would give you a 50% chance of running out of money before you die. If you took $3,000 a year starting at 65 you'd be 85% likely to run out of money before you die.) These are insanely low retirement incomes! yet its what some 75% of Americans will get!75% of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts
(Out of curiosity - how many people know what the safe withdrawal rate is?)
low levels of financial literacy have serious implications for the ability of broad segments of the population to retire comfortably, particularly in an age dominated by defined-contribution retirement plans.
Across the board Bonds are a complete mystery to the vast majority of Americans
-Only 40% of Americans that identified themselves as 'investors' (Not professional investors) could correctly answer 'Would you rather have one million dollars now or one penny that would double in value every day for a month'
-64% of Americans understand how inflation affects prices but only 35% actually know about what the rate is and 28% know how to protect against it
-Jump$art found that financial literacy scores for High School and College students are at an all time low from when the Jumpstart tests started being offered in 1997
(Less than half correctly answered that sales tax will make things more expensive to buy!)
Yet with all of this people are just barely paying attention to the problem. Only 13 states require a personal finance course even though studies have shown a direct correlation between the states that require those courses and the students being more likely save money, less likely to have excessive credit card debt and are more likely to pay bills on time
Few people seem to be talking about educating our kids despite all of the evidence that financial education has a very real effect on their lives. Instead we rely on the illiterate (parents) to teach their kids about money. We hope that the few financially literate will and have the ability to teach their kids about money. We are knowingly continuing to turn out generations of children who will struggle their entire lives with money and end up financially destitute and utterly dependent on SS to survive
I would encourage you to bring up these concerns if you are ever in conversation with a teacher, school official or legislative representative.
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