A recent study done across several different age groups throughout the country revealed a troubling finding about financial literacy among Americans. The study, which surveyed a total of 3,389 adults, showed that the average adult loses about $1,389.06 annually due to a lack of financial knowledge, including personal finance and investments. If you extrapolate these findings out to the entire country, this lack of financial literacy cost Americans an estimated $352 billion in 2021. Many individuals in the study were found to have estimated losses in the tens of thousands over the course of their lifetimes. However, while many Americans aren’t as well versed in their personal finances as they should be, there are lots of options available to help educate you on how to manage your finances more effectively.
A financial advisor may be able to help you, too, so check out SmartAsset’s free advisor matching tool to find advisors in your area today.
Results of the Survey
At the end of 2021, the National Financial Educators Council (NFEC) conducted a survey among 3,389 adults. Respondents were divided into six different age groups. The survey only asked one question: “During the past year, about how much money do you think you lost because you lacked knowledge about personal finances?”
The results were stark. On average, respondents estimated losing $1,389.06 in 2021 due to a lack of knowledge about personal finance. If you take that $1,389.06 and extrapolate it out to the entire adult population of the United States, Americans lost more than $350 billion in 2021 due to insufficient personal finance knowledge. On top of those findings, nearly one in five survey respondents reported losing more than $2,500 in 2021 due to a lack of personal finance knowledge.
“It’s also important to note that the estimates reported in these surveys may represent significant underestimates; many people who lack financial capability may not even be aware of their losses,” the NFEC said in a statement.
The lack of financial knowledge has consequences in people’s day-to-day lives, including banking fees, high interest rates on loans and credit cards and investment losses, the NFEC said.
Why Is Financial Literacy So Poor?
There are plenty of possible explanations as to why Americans fall so short when it comes to personal finance literacy. However, these results are nothing new, showing that the problem is persistent. For comparison, the same survey conducted in 2020 showed average losses of $1,634. Another survey conducted in 2017 showed that the average reported lifetime loss due to financial illiteracy was $9,725, and 25% of respondents even reported losing over $30,000.
Perhaps the most common and popular explanation for these losses and lagging personal finance education is the fact that schools don’t usually teach children how to manage their money. In 2020, Next Gen Personal Finance reported that some kind of person finance course is a graduation requirement in just 18.4% of U.S. high schools. Most adults are left to their own devices when it comes to financial literacy.
Another potential explanation is a lack of access to financial education resources like financial advisors. According to a study done in 2021 by Statista, just 38% of Americans worked with a financial advisor last year, while 54% of Americans reported that they didn’t have a financial representation at all. Having a financial advisor to help you with your finances can be a big help when it comes to financially educating yourself.
What Can You Do to Prevent Losing Money?
Simply put, the best way to avoid losing money due to a lack of personal financial knowledge is to learn more about how to manage your money in an advantageous way. Luckily, there is a handful of different ways to do so.
One of the best, quickest and cheapest ways to learn about personal finance is to do research. There are lots of sites out there with resources to help you learn different terms and figure out how to best manage your money. SmartAsset.com has a number of different free online resources for you to use. The site has articles that define terms about taxes, investing and retirement, and you can also use calculators that will tailor themselves to your specific financial situation.
It’s also a good idea to consider working with a financial advisor. Financial advisors are often financial trained professionals who can do the heavy lifting for you while helping you learn about financial topics that you may be unfamiliar with. SmartAsset can help match you with a qualified advisor, so consider using our free advisor matching tool today.
Bottom Line
Financial illiteracy is common in the United States, as personal finance isn’t something taught in most public or private schools. It’s easy to understand why so many Americans lose money due to a lack of personal financial knowledge. However, there are always steps you can take to get a better grasp on your finances. Online research is always a great place to start, and depending on your financial situation, you may also want to work with a financial advisor. SmartAsset has you covered on both ends, so consider trying our free advisor matching tool to find advisors in your area whenever you’re ready to learn more about managing your money.
Tips for Managing Your Finances
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It’s no secret that managing your money and becoming financially literate is no easy task. A financial advisor may be able to help you get your finances in order. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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If you’re not ready to work with a financial advisor to get your finances in order, SmartAsset still has you covered. At our website you can find a variety of free online resources to help you get educated and organized when it comes to your finances. For example, check out our free retirement calculator and get started today.
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Source: finance.yahoo.com