When it comes to financial literacy, many Americans are struggling. From carrying perpetual credit card debt to taking out payday loans with astronomical interest, people are making bad decisions daily that contribute to their financial detriment.
To uncover just how serious the issue is, GOBankingRates researched statistics from the 2021 Financial Literacy and Preparedness Survey, which was conducted online within the United States by The Harris Poll on behalf of NFCC and Wells Fargo, as well as other statistical sources.
62% of Americans Say They Are Worried About Their Finances
According to the NFCC/Wells Fargo survey, the majority of Americans have financial concerns and many are experiencing increased worry about meeting basic household expenses, making debt payments on time, having enough money for emergencies or being able to save for future goals than they were a year ago. Of course, inflation will only serve to increase their worries.
Only 44% Follow a Budget
Following a budget allows you to track and control your money, which can lead to greater financial success. However, less than half of Americans have a budgeting plan in place, according to the NFCC/Wells Fargo survey.
38% of Households Carry Credit Card Debt From Month to Month
According to the NFCC/Wells Fargo survey, although half of Americans are carrying credit card debt, 38% are carrying the same amount of debt from month to month.
“Too often people will use credit cards to pay for everything but neglect to pay off the balance before the end of the month,” said consumer analyst Julie Ramhold with DealNews. “In some cases, this is their only option to buy things like food or pay for utilities. But in many cases, people look at credit cards as a buy now, pay later option — that is, buy whatever they want now and then just pay off the debt over time.”
She added, “In truth, the better thing to do is if you’re using the credit card for purchases that aren’t necessities, make sure you have the funds to pay for them otherwise; then you can put them on your card but pay off the balance before it has a chance to accrue interest.”
23% Say They Are Not Saving for Retirement
While two-thirds of the general population are saving for retirement, over one-fifth are saving nothing, according to the NFCC/Wells Fargo survey.
Retirement is the last dog at the bowl for most people,” said Cyndie Martini, CEO and founder of Member Access Processing. “Because retirement always seems to be in the far distance, it is the last thing that most people save for. Other expenses take precedent over saving for retirement. At the same time, costs for the retired, including the cost of medical insurance and retirement communities is rising.”
“Mutual funds and Roth IRAs have made saving for retirement easy, even if you are investing small amounts. The important thing is to be consistent. If it’s $100 dollars a month, over 20, 30 years, you are looking at significant savings. Does your employer match your retirement savings at some percentage? Always, always withdraw from your paycheck at least the amount your employer matches.”
28% Say They Would Use Credit Cards To Pay for a $2,000 Emergency
According to the survey, 53% said they would dip into savings for an emergency, but only 12% said they would use an emergency fund. That means that most Americans either don’t have an emergency savings account or might not have enough in it to cover an expense of $2,000.
“Life happens and no matter how much money you make, if you always spend it all then when life’s emergencies happen, you are stuck and incur debt to cover these emergencies,” said Wendy Barlin, CPA and owner of About Profit. “Most credit card debt in this country is due to medical bills! My husband just found out he needs a tooth extracted and a crown. Huge expense — BUT we have our emergency fund set up just for this. Life happens!”
According to the survey, along with 28% who said they would use a credit card, 16% said they would have to borrow from friends of family, and 11% said they would have to pawn something to cover a $2K emergency expense.
64% Used a Payday Loan for the First Time in the Past Year
The most popular reason was to get a small loan, such as to cover the financial gap between paychecks. According the Consumer Financial Protection Bureau, a fee of $15 per $100 borrowed is commonly charged by payday loan lenders, which equals an APR of almost 400% for a two-week loan.
“Many Americans are simply operating according to their lived experience, which includes not making a fair and living wage,” said Kia McAllister-Young, director of America Saves. “When inflation is increasing but wages are not, it affects your ability to save. Add to that a pandemic that many are still recovering from and it’s evident that there should be lots of grace and understanding of why so many people live paycheck to paycheck.”
61% Can No Longer Afford Student Loan Payments
According to the Student Debt Crisis Center, a new survey of student loan borrowers found that out of those who easily afforded their student loan payments before the pandemic, 61% now cannot make payments, are struggling to make payments or are in default.
Only 10 States Guarantee at Least a One-Semester Course in Personal Finance Before Graduation
Research shows that when students receive financial education, they are more equipped to make sensible borrowing decisions. Unfortunately, according to Next Gen Personal Finance, a nonprofit with a mission for all students to take at least one semester of personal finance before graduation by the year 2030, only one in five students is currently guaranteed to take a personal finance course before graduating.
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