Confidently Incorrect: The Decline of Financial Literacy
Sherman Hanna, a professor of consumer sciences at The Ohio State University, headed up a study that tracked the progress of financial knowledge of Americans over nearly a decade. Using data gathered through the National Financial Capability study, which survey’s respondents every three years, Hanna and colleagues analyzed four rounds of financial knowledge scores, controlling for variables like age, ethnicity, and education.1
They found that from 2009–2018 people's measurable financial knowledge declined steadily. While at the same time their personal rating of their own financial knowledge increased. According to a release about the study, the percentage of people who believed they were above average in financial literacy, but actually scored below average on the test, increased from 15% up to 21% during that period.
The obvious takeaway from this is to be very careful about acting on financial advice from friends and relatives, especially when they're adamant that they know what they’re talking about. A close second would be to cultivate humility about your own level of knowledge. Be open to the idea that you still have lots to learn.
Let’s talk about your options. And make it a point to educate yourself. The better educated you are, the less likely you are to make costly decisions.
Related articles
The holidays can be a difficult time for many people. It’s also a time of thanks and gatherings with family and friends. Harvard Medical School’s research states, "Each holiday season comes with...
As prices for household goods seem to continue to climb, when student loan payments restart, many people are wondering how they’ll fit these payments in. In this article, learn tips for paying off...
On its surface, investing for retirement seems to be all about getting the numbers right. Your timeline, your tax strategy, your portfolio allocation, and your income goals are all things that can be...