A whopping 84 percent of Americans have never participated in any sort of financial education program, yet many claim to possess a great deal of knowledge when it comes to finances.
Not surprisingly, they’re wrong.
Financial research firm Raddon found 44 percent of adults said they were extremely or very financially literate. But when given a quiz on the topic, only half passed and just 6 percent earned an “A” (scoring 90 percent or better).
Among survey respondents who indicated they had taken some sort of financial literacy course, scores were better—highlighting the necessity and effectiveness of educating consumers about money matters.
“A majority…who participate in a financial education program find value, and in a market that is intensely experience and relationship driven, providing financial education can help institutions to stand out and build depth with their customers,” David Irwin, president of Raddon, said in a statement. “Closing the gap between customer perceptions of their own financial literacy and reality will help them develop the skills to build financial health.”
According to Raddon’s report Financial Literacy: Prosperity Begins with Knowledge, financial literacy tends to increase with age and income, and along with that comes improved financial confidence.
Gen Xers, however, stray from this trend, perhaps experiencing something that could be dubbed post-traumatic financial stress disorder. The report points out that this generation was old enough to both fully understand and be heavily impacted by the early-2000s dot-com bust and the 2008 recession.
“The impact of these events personally and professionally sets them apart from the rest of the study respondents in that they are less likely to be overconfident about their financial knowledge,” the report noted, “and their financial goals are more likely aimed at recovery and stability than other generations.”
Informed by its data, Raddon suggests financial education efforts should have a specific focus to achieve greater efficacy. “More than half of consumers (51 percent) feel understanding financial concepts and financial products is required only on a need-to-know basis, or if they are in need of a certain financial product,” the report explained.
As such, 38 percent of respondents said a financial literacy program that addresses topics like money management, retirement and investments “would be extremely or very valuable, with higher numbers among Millennials (55 percent).”