The financial capabilities of Americans leave a lot to be desired, as they continue to struggle with handling their money. Take this financial test to see how you compare.
The financial capabilities of Americans leave a lot to be desired, as they continue to struggle with handling their money, according to results from a new survey.
The State-by-State Capability Survey by FINRA Investor Education Foundation also revealed that Americans have a very low financial literacy. On a test of five basic financial literacy questions, the national average was just 2.88 correct answers.
The five financial literary questions revealed that while three quarters of Americans have positive perceptions of their financial knowledge and math skills, only 14% were able to answer all five questions correctly.
“This survey reveals that many Americans continue to struggle to make ends meet, plan ahead and make sound financial decisions — and that financial literacy levels remain low, especially among our youngest workers,” FINRA Foundation Chairman Richard Ketchum said in a statement. “No matter how you slice and dice it, this rich, new dataset underscores the need for us to continue to explore innovative ways to build financial capability among consumers.”
The survey gathered responses from more than 25,000 Americans and was developed in consultation with the U.S. Department of the Treasury. Five measures of financial capability were used to measure how well Americans are managing their day-to-day finances and saving for their futures.
California, Massachusetts and New Jersey are the most financially capable, according to FINRA, with all three ranking in the top for at least three of the five measures of financial capability.
However, overall, Americans didn’t do so well. According to the report, 59% of Americans surveyed reported spending more than their income. More than half (56%) do not have an emergency fund that could last them three months of unanticipated financial emergencies, plus 26% have unpaid medical bills.
Compared to the 2009 study, though, more people have rainy day funds and fewer respondents reported difficulty in making ends meet, according to Ketchum. Despite forward progress in these areas, Americans still need to work on key aspects.
“… many consumers continue to feel financial strains, and the study found that a large number of Americans borrow money in potentially expensive ways and carry too much debt,” Ketchum wrote at the beginning of the report.
Financial capabilities are lower among younger Americans, those with lower incomes (less than $25,000 a year) and less education (no post-secondary education). Americans between the ages of 18 and 34 are far more likely to have taken a loan from their retirement account, taken a hardship withdrawal from their retirement account or be late with mortgage payments.
How would you do on the financial literacy test?