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When it comes to money matters, what you don’t know can hurt you.
A report by the National Financial Educators Council shows that 38% of people in a recent survey said their lack of financial literacy cost them at least $500 in 2022, including 15% who said it saved them $10,000 US dollars or more were thrown back. That’s an increase of about 11% in 2021.
The majority (68%) of respondents said that poor financial literacy cost them between zero and $499.
The average cost was $1,819, according to the survey, conducted Oct. 23 to Dec. 5 of about 3,000 adults across the country. This number for 2022 is nearly $500 higher than the 2021 average of $1,389.
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“A lot of people come out [school] without being taught detailed financial knowledge,” said board-certified financial planner Denis Poljak, partner in Poljak Group Wealth Management at Steward Partners in Shreveport, Louisiana.
“In the end, they just learn… from their mistakes,” Poljak said.
Studies show that many US adults lack financial literacy – which generally means understanding money issues like income, budgeting, saving and investing, as well as how interest rates work and why creditworthiness.
For example, in 2022, on average, adults correctly answered 50% of the 28 basic income questions TIAA Institute-GFLEC Personal Finance Index, the sixth annual Financial Literacy Barometer. Worse, the proportion of respondents (23%) who got no more than seven correct answers is higher than in any other year of the survey.
The problem, experts say, is that a lack of knowledge can affect everything from how much you save — whether for emergencies or long-term (e.g., retirement) — to how much debt you take on and on what terms.
Financial literacy is “a key tool in the toolbox”
Financial literacy advocates say classes must begin before teens graduate from high school. According to the nonprofit Council for Economic Education, as of last year, 24 states have required personal finance courses through the 12th grade.
“There is good data showing that people make better decisions when they are financially literate,” said Nan Morrison, President and CEO of CEE.
For example, Morrison said, you probably have better credit and less likely Credit default if you have personal finance know-how. A 2015 study by the Investor Education Foundation of the Financial Industry Regulatory Authority confirms this: Three years after personal finance education was introduced in Georgia, Texas and Idaho, all three states saw crime rates fall and credit scores rise.
Additionally, according to the latest FINRA Foundation study, in 2021, people who scored above the median of seven questions on a financial literacy quiz were more likely to make ends meet. Specifically, they spent less than their income (53% vs. 35%) and had three months of higher-level emergency funds (65% vs. 42%).
They were also more likely to have calculated their retirement needs (52% vs. 29%) and opened a retirement account (70% vs. 43%), according to the study.
“For me, the bottom line is that in order to live the life you want to live, you have to understand how to manage money,” Morrison said. “It’s not the only important thing, but it’s a key tool in the toolbox.”
https://www.cnbc.com/2023/01/19/heres-how-much-people-say-lack-of-financial-literacy-cost-in-2022.html Here’s what people say what a lack of financial literacy will cost in 2022