11 Shocking Statistics About Financial Literacy You Won't Believe
We often hear that financial literacy is essential. But just how important is it? Well, here are eleven statistics that help to show how vital financial literacy is.
3 in 5 people are living paycheck to paycheck.
For many Americans, living paycheck to paycheck has become the new normal. Unfortunately, this stat is trending upwards. Even more surprising is that it is trending up for people making over $100,000 a year.
Stagnant wages, lifestyle creep, and the rising cost of living make it difficult for many families to make ends meet.
The financial insecurity caused by living paycheck to paycheck can seriously affect one’s physical and mental health and well-being.
47% of Americans can’t handle an unexpected $500 expense without worry.
The average American doesn’t have a lot of money saved up. Unexpected expenses happen all the time. A broken down car, a medical bill, or even losing your job can all lead to financial ruin when unprepared.
Without a rainy day fund, Americans rely on credit cards or loans to get by. Unfortunately, this can quickly become a cycle of debt that’s hard to break free from.
Sources: Personal Capital, Federal Reserve Board Publication, and Bankrate
The average annual cost of tuition at a public 4-year college has increased 747.8% since 1963.
The cost of higher education across the country continues to trend upwards.
For many students and families, taking out loans is the only way to cover the rising costs of tuition. However, with the costs rising so rapidly, this may lead to a massive debt burden that can postpone reaching financial goals like buying a home, starting a family, or achieving financial impedance.
Sources: Education Data Initiative, NBC News, and Forbes
60 million Americans are unbanked or underbanked.
According to the Federal Deposit Insurance Corporation (FDIC), approximately 60 Million Americans are unbanked or underbanked. Unbanked refers to people who do not have a checking or savings account. Underbanked means folks may have a banking account but also rely on alternative financial services.
Being unbanked or underbanked is a very costly way to manage your money. These Americans have a more challenging time saving and planning for emergencies. In addition, they typically have less access to credit. As a result, they can spend thousands of dollars over their lives in fees and interest just to access and manage their money.
4 out of 5 (81%) of Americans think parents should be teaching their children about money, but almost a third (28%) never talk to their kids about money or only talk about it once a month or less.
Kids need to know how to manage money to be successful adults. If they don’t learn how to save, budget, and make wise financial decisions while young, they may struggle when they are out on their own.
Money conversations can teach kids important life lessons like delayed gratification, the value of work, and how to be grateful for what they want rather than seeking more. These are all skills that will serve them well throughout their lives.
Sources: Money Confident Kids and CNBC
1 in 3 (37%) working Americans are not saving for retirement and more than half (56%) of Americans don’t believe they will have enough saved for retirement.
Many Americans are not on track to have a comfortable retirement or to retire at all.
While working longer may work for some, depending on their expertise and health, working longer may not be an option.
The ramifications of this are many and severe. Not having enough for retirement could mean downsizing and losing access to your community. It can also lead to feeling financially insecure or depending on your loved ones to support you while potentially leaving behind debt for your descendants.
Sources: Anytime Estimate and CNBC
Almost half (49%) of Americans depend on credit cards to cover essential living expenses.
For far too many Americans, credit cards are now how they make ends meet at the end of the month.
Depending on credit card debt to manage necessities can be stressful and expensive. In addition, if folks carry their credit balances forward month after month, their interest fees may quickly make it hard to pay off what they owe.
A high debt load can set you back financially as it can negatively impact your credit score, make it hard for you to save, and add more bills to your budget.
Source: Inside 1031
Inflation is the number 1 cause of stress.
Inflation makes life harder for everyone. Pushing the cost of living higher while wages struggle to keep. Inflation chips away at our buying power. So it should be no surprise that this is stressing people out.
Worries over the loss of income and supply chain were also high among the causes of stress.
Sources: American Psychological Association and Healthline
Only 54% of Americans have a will.
The state gets to decide how to distribute your assets if you don’t have a will. While you may be gone, it is unlikely that your wishes for your money will be known or honored if you do not have a will.
This is even more important if you have dependents. Your will is where you appoint guardians for your children in the event of your death. Without a will, it will be a court that gets to decide.
Your will is how you can provide long-term financial security for your loved ones and ensure your wishes are fulfilled.
75 percent of Americans are winging it when it comes to their financial future.
Financial plans are critical because they establish financial goals and a path to reach them. When people “wing it” with their money, they will find they are less able to manage their resources effectively or prepare for emergencies. Planning can also relieve the stress and anxiety people feel toward their money.
Source: CNBC
Less than half (46%) of states require students to take a personal finance to graduate high school.
Far too many American students graduate from high school and college without a basic understanding of personal finance. As a result, many of these young adults lack the skills or the confidence to manage their finances. This can lead to poor financial decision-making and a lifetime of financial insecurity.
Personal finance classes can help develop good money habits early on.
Source: Council for Economic Education
Statistics on Financial Literacy: Final Thoughts
The statistics on financial literacy can be shocking, but hopefully they urge you to educate yourself. Learning more about financial literacy is a great way to take away any stress and anxiety. Establish financial goals and start working towards them.
