For 80% of Americans, Their Lack of Financial Education Has Been Costly

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Knowledge is power, as the saying goes, and never is this more true than when money is involved. A new study from GOBankingRates that surveyed more than 1,000 American adults found that only about 1 in 5 people feel sufficiently educated about their finances to a point where it hasn’t hurt them financially. 

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For the other 80%, a lack of financial literacy has led to debt, overpriced loans and a reluctance to invest their money. 

With all the information in the world just a few clicks away, the results of this study show just how important it is to choose those clicks wisely. Instead of wasting idle hours doomscrolling your newsfeed, your online time would likely be far better spent transforming yourself into a better saver, investor, budgeter and spender.  

A Lack of Financial Education Holds People Back From Investing

With the average savings account now yielding a barely perceptible 0.07% interest, investing unspent income is the key to wealth generation. But whether you invest in real estate, the stock market, bitcoin or anything else, you’re doomed to fail if you don’t understand your investment specifically and the nature of investing in general — and the study’s respondents seem to understand that.

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Across every single age group, from 18- to 24-year-olds through the 65-and-up demographic, between 40% and 50% of the study’s participants admitted that a lack of financial education made them avoid investing. The 44- to 55-year-olds were most likely to lack the confidence needed to invest, and women were slightly more likely than men to be gun shy about putting their money to work. 

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Without Sufficient Money Knowledge, You’re at Risk of Overpaying for Loans

About 1 in 5 respondents reported paying more for loans than they would have if they had been better educated about their finances. Older sets were in much better shape — only about 14% of those ages 55 and up thought they got stuck with higher interest rates than they should have. 

Although more than 20% of 18- to 24-year-olds reported taking out pricey loans that they blamed on incomplete financial education, those Gen Zers, surprisingly, were in better shape than older borrowers between the ages of 25-44, about 1 in 4 of whom reported the same. Fewer women than men fell into this trap, but only by the slimmest of margins. 

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Borrowing Without the Knowledge To Back It Up Is a Sure Way To Drown in Debt

Overpaying for loans is the first part of getting into financial trouble when borrowing — a failure to understand how to pay off those loans is the other part. The results of the study are proof of this, but here, age played a much larger role. 

About 20% of 18- to 24-year-olds reported not knowing how to pay off debt because of their lack of financial education — 16% of 25- to 34-year-olds and 19% of 35- to 44-year-olds said the same. Older borrowers fared much better, with only 10% of those ages 65 and up reporting the same trouble. 

Although age was a determining factor in this category, gender was not — both men and women stumbled over this financial roadblock in almost identical proportions. 

If You’re Behind on Financial Literacy, You Are Not Alone

Aside from analyzing how an incomplete financial education can impact your money life, the study also examined the root of this widespread lack of knowledge. More than three out of four respondents believe that high schools are lacking in financial education despite the fact that the largest plurality of participants, about 26%, said they learned most of what they know in high school classes.

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Even worse, what was lacking in formal education in school was often not made up for at home. Three out of four reported that their parents either never talked to them about money or did, but only occasionally or not very often. 

Financial Education Is Your Responsibility — But It’s OK To Cheat

With high schools and even parents letting so many young people down, the onus for financial education often lands on the individual — and unlike in high school, it’s OK to cheat in the real world. 

To help you along the path to financial literacy, GOBankingRates developed the following cheat sheets to break down the big, confusing world of financial literacy into smaller, more digestible chunks. 

If you’re tired of being intimidated by investing, struggling with debt and overpaying for loans, these guides are the best place to start your journey to financial education:

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Methodology: GOBankingRates surveyed 1,012 Americans aged 18 and older from across the country on between March 8 and March 9, 2022, asking sixteen different questions: (1) Do you consider yourself financially literate?; (2) Where did you learn most of your financial literacy?; (3) Which financial topic do you think you should have learned more about in high school? (Select all that apply); (4) Which financial topic do you still feel you need more education on in 2022? (Select all that apply); (5) When you were growing up, did your parents talk to you about how to manage your money?; (6) Do you think high schools are lacking in financial education?; (7) How has a lack of financial education cost you the most?; (8) At what age did you become comfortable with basic money skills (i.e., writing a check, balancing your accounts, budgeting)?; (9) At what age did you start saving and planning for retirement?; (10) How do you feel about how you used your 2021 American Rescue Plan stimulus check?; (11) Which financial topic did you feel the need to learn more about due to the COVID-19 pandemic? (Select all that apply); (12) What do you not understand about the Child Tax Credit? (Select all that apply); (13) Which part of the homebuying process is most confusing to you?; (14) Which part of the car buying process is most confusing to you?; (15) Are you prepared for the student loan debt moratorium to end in May?; and (16) How are you changing your driving habits with the rising gas prices? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.
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