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Survey: Most Americans "Flunk" Financial Literacy

A new study indicates most Americans really don't know enough about how to handle their money. (Jericho/Wikimedia Commons)
A new study indicates most Americans really don't know enough about how to handle their money. (Jericho/Wikimedia Commons)
August 1, 2016

AUGUSTA, Maine – Mainers may want to take heed of a new nationwide survey that says only about one in three Americans is financially literate – lacking a basic understanding of budgeting, long-term planning and using credit wisely.

The survey results do not surprise J. Michael Collins, who directs the Center for Financial Security at the University of Wisconsin-Madison. He says so many people struggle to get by, in part because they really don't know much about money, credit and banking.

At particular risk, he says, are minorities and young people, who were never taught the basics.

"There's a whole generation of people who didn't get brought up with that,” Collins states. “They didn't get taught it at home, they didn't get taught it at school, and now it's a burden on them that they have to try to figure out.

“People who don't have a good grasp of managing their money struggle more with credit and debt. They have a hard time paying bills on time. They don't have financial plans. They don't save as much for retirement."

The survey included more than 27,000 Americans, measuring their grasp of such concepts as budgeting, planning ahead, financial knowledge and decision-making.

According to Collins, it isn't that difficult to learn the basic concepts for managing income, but some people shy away because it involves basic math.

He says improving financial literacy is critical to surviving. He maintains one reason two-thirds of Americans are financially illiterate is that the topic of money is often taboo.

"We don't talk about money with our friends and family,” he points out. “We feel uncomfortable when people talk about money in front of us, so it's a combination of a skill set that we sort of feel uncomfortable with, that we don't feel confident about, and the fact that this is an issue that's just not talked about."

Collins stresses improving financial management is grounded in having a system and paying regular attention to simple financial management tasks such as paying bills on time and saving for retirement.

He says increasing financial literacy is like diet or exercise: Step One is paying attention and making it a priority.

Mike Clifford, Public News Service - ME