Sunday, February 5, 2023

CNBC: Lack of financial education costing some adults thousands of dollars in 2022, here’s how

what to know

  • The share of people who say they have no financial literacy is set to grow to 11% in 2021, according to a new report.
  • Most respondents say it cost them less than $500, if at all.
  • Advocates say research shows that students see the importance of being taught personal finance in the classroom before they reach adulthood and face many financial decisions.

When it comes to money, what you don’t know can hurt you.

A report by the National Council of Financial Educators shows that a recent survey found 38% of people saying a lack of financial education would cost them at least $500 in 2022, with 15% saying it would cost them is $10,000 or more. This is an increase of about 11% in 2021.

A majority of those surveyed (68%) said that poor financial education cost them anywhere from zero to $499.

According to the survey conducted Oct. 23-Dec. 5 among some 3,000 adults nationwide, the average cost was $1,819. This 2022 figure is almost $500 higher than the 2021 average of $1,389.

“A lot of people come out [escuela] without receiving a detailed financial education,” said certified financial planner Dennis Poljak, a partner with Poljak Group Wealth Management at Steward Partners in Shreveport, Louisiana.

Poljak said, “They just end up … learning from their mistakes.”

There is a huge gap in the financial knowledge of American adults

Financial literacy, which generally means understanding money-related topics ranging from income, budgeting, saving and investing, as well as how interest rates work and why credit scores matter, is lacking among many American adults, studies show. Let’s go

For example, adults answered an average of 50% correctly on average of 28 basic questions about money in the 2022 TIAA Institute-GFLEC Personal Finance Index, the sixth annual barometer of financial literacy. Worse, the proportion of respondents (23%) who failed to answer more than seven correctly is higher than in any other year in the survey.

The problem, say experts, is that a lack of knowledge can affect everything from how much you save, whether for emergencies or the long term (ie retirement), to how much debt you take out and on what terms.

Some important financial decisions may come before or soon after you become an adult. Just to name a few: Deciding to pay for college, manage credit card or car loans, raise your credit score, pay taxes, and start saving for retirement even if you’re decades away.

Financial education is “an important tool in the toolkit”

Financial education advocates say that teaching should begin before teens graduate from high school. As of last year, 24 states require personal finance courses for grade 12, according to the nonprofit Council on Economic Education.

“There is good data showing that people make better decisions when they are financially literate,” said Nan Morrison, President and CEO of CEE.

For example, Morrison said, you’re more likely to have a better credit score and less likely to default on a loan if you have some knowledge of personal finance. A 2015 study by the Financial Industry Regulatory Authority’s Investor Education Foundation found this: three years after personal finance education was implemented in Georgia, Texas, and Idaho, all three states saw a drop in attrition rates. Serious delinquencies and rising credit scores.

In addition, in 2021, people who scored above average on a seven-question financial literacy quiz were more likely to meet their needs, according to the latest FINRA Foundation Financial Fitness Study. Specifically, they spent less of their income (53% versus 35%) and had a three-month emergency fund at a higher level (65% versus 42%).

They were also more likely to calculate their retirement savings needs (52% versus 29%) and to open a retirement account (70% versus 43%), according to the study.

Morrison said, “The bottom line for me is that in order to live the life you want to live, you need to understand how to manage money.” “It’s not the only important thing, but it’s an important tool in the toolkit.”

This article was originally published in English by Sarah O’Brien For our affiliate network For more from CNBC, go here.

Nation World News Desk
Nation World News Desk
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