Personal Finance Statistics

From a quick glance at personal finance statistics, most will be dismayed at what they see. Individuals around the world, often lacking a solid foundation of personal financial knowledge, appear to be inept at the task of managing their own finances. Over the course of their lifetimes, many will make strategic errors in planning that will culminate in a decreased standard of living and increased stress leading up to retirement. Personal finance statistics are a wake-up call for many educators around the globe.

Researchers at NBER demonstrated the positive relation between the average stock market participation between the individual’s community and the individual’s participation rate in the markets. This effect was proven to be stronger in more sociable communities (National Bureau of Economic Research). http://www.nber.org/papers/w13168.pdf

A statistically significant association was determined between negative financial habits, such as gambling among Australian youth, and the influence of peers and parents (Science Direct). https://www.sciencedirect.com/science/article/pii/S0140197103000137?via%3Dihub

A team of researchers surveyed students at 15 geographically diverse colleges to assess financial knowledge and behavior. Student responses were organized into 1 of 6 categories based on the type of financial education policy a student’s home state had for high school. The categories ranged from a state with no standards at all to states that required a financial literacy course and assessment in high school.

Students whose home states required financial education courses were found to be more likely to save, less likely to make late credit card payments, and more likely to take on a healthy amount of financial risk. While 1.3% of those with no state standards ‘maxed out’ their credit cards, only 0.7% of those with a required course and corresponding assessment ‘maxed out’ their credit cards. When asked if used a budget, 46.7% of those with no state standards replied yes while 52.9% of those with a course and assessment replied yes (National Endowment for Financial Education). https://www.nefe.org/Portals/0/WhatWeProvide/PrimaryResearch/PDF/
Gutter_FinMgtPracticesofCollegeStudents_Final.pdf

Borrowers who scored lowest on a test of financial literacy were in mortgage delinquency 25% of the time, compared to the 12% mortgage delinquency for those who scored highest on the assessment (Federal Reserve Bank of Atlanta). https://www.frbatlanta.org/-/media/documents/research/publications/wp/2010/wp1010.pdf

A 0.2 increase in standard deviation on a financial literacy score would result in a predicted additional $13,800 in new wealth (American Economic Review). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3554245/pdf/nihms-400812.pdf

In a survey conducted by the National Financial Educators Council, 5.2% reported they had been turned down from a job due to a lack of financial knowledge, and 18.2% responded they were not sure (National Financial Educators Council). https://www.financialeducatorscouncil.org/financial-literacy-statistics

11.5% of 2014 college graduates have loans in default (Federal Student Aid Office of US Dept of Education). https://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html

18% of adults cited retiring without having enough money set aside as their top personal finance worry (National Foundation for Credit Counseling). https://www.nfcc.org/wp-content/uploads/2017/03/NFCC_BECU_2017-FLS_datasheet-with-key-findings.pdf

Citing a study that showed decreased rates of mortgage delinquency after one-on-one credit counseling, the Federal Reserve suggests programs could consider smaller class sizes and more personalized coaching to mold consumer behavior (Federal Reserve). https://www.federalreserve.gov/pubs/bulletin/2003/0703lead.pdf

New Zealand’s Commission for Financial Literacy and Retirement Income advocates that a benchmark should be constructed for the purpose of assessing the effectiveness of the program in different areas of the community (Commission for Financial Capability). https://www.cffc.org.nz/assets/Documents/National-Strategy-for-Financial-Literacy-2012.pdf

Attending an employer-sponsored retirement seminar saw net worth increase by nearly 27% for those who were in the lowest income bracket and had not received a high school diploma (Dartmouth). http://www.dartmouth.edu.