Taking financial responsibility for yourself isn’t one of the perks most people look forward to in adulthood, experts say. But, according to a recent online survey, not knowing how to manage money can be a costly mistake.
According to a survey by the National Financial Educators Council, Americans estimate they lost an average of $1,171 per person in 2017. The survey suggests that the losses are due to lack of financial knowledge. About half of respondents ages 18-24 reported losses of $1,000 or less, while 15 percent reported losing $30,000 or more.
A variety of factors from bad loans to social media could be at fault.
“They could have lost it because they did not realize they could refinance their bank loan at a lower interest rate or they could have blindly invested in a company based on a tweet,” said Janice Bae, 24, auditor and Ernst & Young.
The one-question survey was conducted online and featured 1,515 response from people of diverse age groups across the country. The highest losses were reported by 55 – 64 year-olds, with almost one-third of respondents claiming to have lost $30,000 or more due to lack of financial knowledge.
“I think there are different levels of financial literacy, from being able to balance your checkbook to actually reading the financial statements of a public company,” Bae said.
Despite the importance of financial literacy, this skill that isn’t always taught in schools. California schools received an ‘F’ in financial literacy in a national survey conducted by the Center for Financial Literacy at Champlain College in Vermont. Although teachers receive access to free financial literacy materials, the topic is not required in K-12 curriculums and some schools do not offer financial literacy classes at all. Yet, this is not a problem unique to California. Of the 50 states surveyed, only 5 were awarded an ‘A.’
Financial literacy includes the knowledge to make decisions about budgeting, investing, credit cards and insurance, the Vermont survey found. People who lack an understanding of these concepts can incur bank charges, credit card debt, high interest rates, and investment losses, researchers concluded.
“The most basic thing they could do is start by creating a budget for the household and asking questions on things they don’t understand, such as interest rates, loans, etc.,” Bae said. “For the average person, I would define financial literacy as the ability to track your assets and liabilities to create a plan for the future.”
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