Personal Finance Statistics

The decisions people make about their own money and how to plan for the future are foundational to having a successful, fulfilling life. Public policy directors and educators should use personal finance statistics to guide them in implementing effective financial education programs. While the numbers show an immediate need for individuals to become more knowledgeable about their own personal finance and how to plan for the future, personal finance statistics also point out the most effective ways to reach people who need it most. When these statistics are interpreted and used wisely, powerful programs can be put into place with minimal trial and error.

Statistics Show Shocking Lack of Personal Finance Knowledge

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.

Design of Personal Finance Statistics Additions

Peers and Communities Mold Personal Financial Behavior

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

Personal Financial Illiteracy has a Negative Impact on Life

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

Capacity of Personal Finance Statistics Decisions

Analysis of Personal Finance Statistics Choices

Roads to Successful Personal Finance Programs

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/~alusardi/Papers/Financial_Education_2004.pdf

Statistics on Personal Finance Offer a Roadmap for Effective Programs

Personal finance statistics are analyzed by financial education program directors to help them align their programs with the financial knowledge needs of the populace. Personal finance statistics representing a chasm between different groups of the population are also used by creators of public policy and directors of financial literacy initiatives in order to guide specific outreach programs targeted at specific groups. When interpreted correctly, personal finance statistics can suggest the most effective program for the most people.

Recently the National Financial Educators Council (NFEC) published the findings from an online survey with 452 adults across the U.S. This report summarizes a set of personal finance statistics regarding respondents’ opinions about a variety of financial literacy topics. The survey was developed in collaboration with Ed Hathman, Ph.D., a survey design and analysis expert widely recognized as an online data collection pioneer.

Survey responses were collected between November 12, 2012 and August 14, 2013 from organic visitors to the NFEC website (www.FinancialEducatorsCouncil.org) who agreed to complete a survey. Demographic information collected in the survey included geographical location, employment, and political affiliation. Respondents to this personal finance survey included residents of 35 U.S. States, Puerto Rico, and the Virgin Islands. An approximate 22% were educators or educational employees; 21% were financial professionals or financial institution employees; 14% worked for nonprofit organizations; 26% were students; and 17% described their current employment as “other.” The highest proportion of respondents indicated affiliation with the Democratic Party (36%), followed by Independents (24%), Republicans (23%), Libertarian (6%), and Other (12%).

One important finding among these personal financial statistics was the strong support respondents expressed for a mandate that students take a financial education course before deciding to take on a student loan. When asked if students should be required to learn money lessons before taking out a student loan, an overwhelming 96% of respondents answered “Yes,” compared to 2% “No” and 2% “Uncertain.”

These findings are interesting when juxtaposed with the results of a financial literacy quiz the NFEC recently conducted with a group of American teens and young adults. They found that less than 30% of youth were able to score higher than 70% on a test of financial knowledge and motivation.

The NFEC has addressed this clear need for financial literacy education by developing a comprehensive set of personal finance lesson plans that can be accessed by educators, parents, and students. Those who believe young people should learn about money before entering into student loan debt should contact the NFEC for information.