DALLAS, Jan. 12, 2022 /PRNewswire/ — Lacking key financial knowledge affects people’s personal finance situations in powerful ways – that fact is well-established. But how much money does financial illiteracy actually cost individuals? The National Financial Educators Council (NFEC) conducted a survey to find out.
The sentiment survey, which took place between November 23, 2021 and December 23, 2021 asked Americans across the country a single question: "During the past year (2021), about how much money do you think you lost because you lacked knowledge about personal finances?"
A total of 3,389 respondents to the survey and were divided into six age ranges. Across all age groups, the average estimated money loss reported due to lack of personal finance knowledge was $1,389.06. If we extrapolate the results to represent a trend among all 254 million US adults, financial illiteracy can be estimated to have cost the country more than $352 billion in 2021.
Review the full survey results here:https://www.financialeducatorscouncil.org/financial-illiteracy-costs/
Further findings showed that 17.9% of survey participants reported losing more than $2,500 in 2021 because of financial illiteracy; and 37% indicated they had lost more than $500. These results were estimated by averaging the total number of participants who selected each category, using the lowest number in each range.
"The economic environment people have to navigate today is incredibly complex," says Vince Shorb, the NFEC’s CEO. "That makes it even more critical to help people get the financial knowledge they need to make real-life decisions. This survey underscores how important financial education has become to our nation."
The NFEC has been conducting this survey over the past six years as part of its ongoing financial literacy research on the costs and risks of financial illiteracy. These statistics serve to clarify the nature and spread of the problems lack of financial education causes – both to our nation’s citizens and to the greater economy.
As a point of comparison, the same survey conducted in 2020 indicated an average loss of $1,634 among participants that year.
In earlier research, the NFEC asked adults around the country how much they estimated having lost during their lifetimes as a result of lacking financial knowledge. In 2017, the average reported lifetime loss was $9,725; one in three participants reported losses over $15,000 and almost 25% said they had lost more than $30,000.
Lack of financial education has multiple consequences in people’s day-to-day lives, including banking fees, high interest rates on loans and credit cards, and investment losses. It’s also important to note that the estimates reported in these surveys may represent significant underestimates; many people who lack financial capability may not even be aware of their losses.
The National Financial Educators Council (NFEC) is a Certified B Corporation and an IACET Accredited Provider promotes financial wellness through worldwide advocacy and education. The NFEC’s research pursuits seek to illuminate the financial health of individuals in the US and abroad. Results of previous research have found strong correlations between people’s financial behaviors and attitudes and their money management capabilities.
SOURCE National Financial Educators Council