Financial education statistics highlight the severe lack of financial knowledge and subsequent discontent that afflicts millions of individuals who were not able to receive a basic education in financial literacy. The same statistics that indicate a dire need for improved financial education also attest to the efficacy of well-crafted financial literacy initiatives based on data and industry wide best practices. Recent financial education statistics clearly demonstrate that efforts to educate individuals, both young and old, in financial literacy result in improved financial behavior.
Less than one in ten (7%) understand that small company stock funds have a higher return over time than large company stock funds, dividend paying stock funds, or high yield bond funds (The American College). http://retirement.theamericancollege.edu/sites/retirement/files/2017_Retirement_Income_Literacy_Report.pdf
Vermont, which ranked 2nd out of all 50 states on a financial literacy assessment, had the lowest rate of non-bank borrowing methods, at 15.2% (US Financial Capability). http://www.usfinancialcapability.org/downloads/NFCS_2015_State_Rankings.pdf
46% of Americans say they have set aside 3 months-worth of living expenses in the case of an emergency (US Financial Capability). http://www.usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf
Households that scored higher on a specially constructed savings index were found to be more likely to own a checking account and have an emergency fund (Federal Reserve). https://www.federalreserve.gov/pubs/bulletin/2003/0703lead.pdf
Financial education statistics, while often discouraging, should not dissuade educators from creating well designed financial literacy programs. Rather, current financial education statistics should serve as a reminder to the pervasiveness of the financial illiteracy epidemic and compel both public and private organizations to bolster their financial education efforts. Through coordinated efforts and by utilizing sustainable program best practices, initiatives have the ability to transform financial behavior and improve the financial education statistics years from now.
Any program aimed at teaching people how better to handle their personal finances should include up-to-date curriculum, relevant materials with practical application, and instructors who have been carefully trained to be effective and engaging. But there’s another critical component: empirical research. According to the National Financial Educators Council (NFEC), collecting financial literacy statistics prior to designing an educational program must not be overlooked.
All NFEC campaigns and resources are based on the latest evidence and empirically-tested learning theory. The organization has adopted a holistic approach to promoting financial literacy; that is, they have fully imagined the entire process of planning and staging an event – from beginning to end. For example, if you seek to reach young people with money management knowledge, you should start by gathering youth financial literacy statistics using validated research methods.
Interested individuals and groups may turn to the NFEC website (www.FinancialEducatorsCouncil.org) for findings from the organization’s recently conducted research studies. One such study was an online assessment of current financial knowledge among American teens. A total 1,309 students aged 15-18 completed a web-based questionnaire that measured their knowledge in several important financial literacy areas. The survey took place from January 2012 to August 2013. Youth scores on the test were less than optimal – fewer than 30% of respondents achieved scores of 70% or higher, and the average score was only 58%.
The clear need to teach today’s young people better skills for managing their personal finances is backed up by findings from a second NFEC study, also conducted in 2012-13. This study surveyed 452 U.S. adults regarding their opinions about financial wellness research. An important example of the results was a question asking the magnitude of the problem that few students fully understand the consequences of taking on student loan debt. More than 93% of adults reported thinking this situation was either a “very big” or a “big” problem.
Accurate measurement is an essential piece to consider when planning any activity designed to build financial capabilities. Part of the planning process should include consultation with the NFEC to obtain the latest financial illiteracy statistics. Such information will guide the development of effective programs and instruction.