Thu, 07 January 2021 | financial literacy
In a recent survey of U.S. adults, the National Financial Educators Council (NFEC) asked a single question: "During the past year (2020), about how much money do you think you lost because you lacked knowledge about personal finances?" On average, the respondents estimated their lack of money management knowledge had cost them $1,634 over the course of the year, or a total of $415 billion for the U.S. as a whole.
The 2020 data ($1,634 per adult) is a sharp increase from 2018 ($1,230) and 2019 ($1,279) surveys. The total cost for the adult population in 2019 (240 million) was $309 billion. The 2020 data accounted for a population increase of 14 million more adults. If the 2019 population data were used today, it would show an increased cost of adult Americans $85 billion more than last year.
Even more concerning was the finding that 21.6% of survey respondents said they had lost more than $2,500 in 2020 because of lacking personal finance knowledge; and 40.4% reported losing more than $500 due to this knowledge gap. This figure was calculated by averaging the total number of respondents selecting each category, using the lowest number in each range.
"Given the complexity of today's financial landscape, with all the changes to the tax code and the rise of digital currencies, it's become critical to make sure people gain the financial knowledge they need," comments Vince Shorb, CEO of the NFEC. "These survey results demonstrate that financial education is more important now than ever before. Improving financial knowledge can empower individuals and the Country."
Deficits in personal finance capability increase people's risk of incurring bank fees, facing high interest rates on loans and credit cards, and losing money in investments. It should be noted that the survey results may represent an underestimate of actual losses, since people may lack financial knowledge but remain unaware of their lost opportunities.
Source: NFEC