Many lack basic financial literacy, the survey shows
A new study from the National Bureau of Economic Research (NBER) says that financial literacy is the lowest among minorities, the young and women.
Hispanics and African Americans scored the lowest on financial aptitude tests conducted in National Survey of 1,488 American adults.
The survey showed that most Americans did not understand critical financial concepts such as interest compounding, inflation, and risk diversification.
These failings were serious for women, the less educated and older individuals. Many individuals were also totally unprepared for retirement, even when that was 5-10 years away.
Some key findings were:
- Younger people were less financially competent than older people
- Women were less financially competent than men
- Minorities (African-American and Hispanic) were less competent than their Caucasian counterparts
- The least financially competent were also (not surprisingly) the least educated i.e., without high school degrees
Strangely enough, all groups rated themselves as rather well-informed about financial matters, regardless of their their actual performance on the key literacy questions.
Finally, the study showed that those who scored higher on the financial literacy questions were also much more likely to plan for retirement, leaving them better positioned for old-age.
Do you feel you have a good grasp of financial concepts? Do you think the young today will have a better economic future than their parents?
