LOS ANGELES, Jan. 9, 2024 /PRNewswire/ — It’s no secret that the world of personal finance is changing rapidly, or that people worldwide lack adequate skill sets to navigate this increasingly complex financial landscape. But how much does financial illiteracy cost? According to a new survey conducted by the National Financial Educators Council (NFEC), that figure can be substantial.
The survey asked a sample of adults across the U.S. a single question: “During the past year (2023), about how much money do you think you lost because you lacked knowledge about personal finances?” Between December 4 and December 17, among the 1,540 individuals who participated in the survey, the estimated average amount of money lost due to lack of financial knowledge was $1,506.
The NFEC separates survey respondents into six age groups, calculates the average amount of money lost, and then extrapolates the total amount of money lost due to financial illiteracy, based on the 240 million adults currently residing in the U.S. That figure exceeded $388 billion in 2023.
See the full survey results here.
In further findings, a proportion of 60.6% of survey participants said lack of financial knowledge cost them more than $500 last year, with 22.1% of them reporting losing more than $2,500. The NFEC calculates these results by averaging the total number of participants who choose each response category, using the lowest number in the range.
“Financial illiteracy in the U.S. has reached epidemic proportions,” Vince Shorb, the NFEC’s CEO, says. “We have never needed widespread financial education more than we do today. We must help all Americans gain the knowledge about managing their personal finances that will empower them to handle the real-world decisions they need to make. The future of our economy and society depends on it.”
The NFEC began gathering these data in 2017 as part of its research exploring the status of financial literacy in the country and uses the results to advocate for greater economic empowerment. In the two previous years’ surveys – 2021 and 2022 – Americans said they lost $1,389 and $1,819, respectively, due to lack of personal finance knowledge. See the full survey results from current and past years.
The need for more financial education in the U.S. is underscored by the current rates of credit card debt (over $1 trillion), lack of emergency savings funds, and shortfalls in retirement savings. It’s important to note that the losses reported in this survey may be underestimated, as people with low levels of financial literacy may not know how much money it actually costs them. For example, lack of financial knowledge can lead to high interest rates, bank overdraft fees, identity theft, and vehicle impoundment – which may not be included in the estimates.
The National Financial Educators Council (NFEC) is a Certified B Corporation and Accredited Provider through IACET, the leading continuing education accreditation entity. The NFEC advocates for greater financial wellness and distributes financial education resources on a global basis. Through its research efforts, the NFEC characterizes people’s financial health across the U.S. and around the world. In previous studies, the organization has clarified strong links between personal finance capability and positive financial behaviors.
SOURCE National Financial Educators Council