Financial Literacy Makes a Difference

We are all about financial literacy, and there’s a hundred reasons why. The biggest reason – knowledge is power, the power to transform lives.

Don’t take our word for it, read excerpts from various studies all showcasing the benefits financial education can have.

  • Young adults in the US are heavily reliant on debt, and their level of financial literacy is low. 79% of 25-year olds in Consumer Credit Panel (CCP) in 2012 held consumer debt. The average debt balance among all 2012 CCP 25 year olds was $22,911.1 Despite this extensive interaction with lending markets, a majority of high school and college students fail basic financial literacy tests. The low financial literacy rates among US youth and an effective delinquency rate of over 30% on student loans for young borrowers in repayment, along with the well- established correlation between financial literacy and financial well-being, has prompted policy-makers and the media to push for more financial education.
  • Financial literacy decreases the probability of having mortgage debt by 0.7 percentage points (on a base of 9%), and of having auto/credit card debt by 0.9 percentage points (on a baseline prevalence of 78%).
  • Financial literacy training also leads to a lower likelihood of having any outstanding debt (a decrease of 1.4 percentage points on a base of 76.2%).

(Source: Financial Education and the Debt Behavior of the Young, Meta Brown§, John Grigsby*, Wilbert van der Klaauw‡, Jaya Wen†, and Basit Zafarϯ)

From the financial education statistics below, most experts are in agreement that people are suffering because they missed out on financial literacy training. Each of these studies point to the fact that most people never received a personal financial education course and the consequences can be challenging:

  • Only 59% of the young adults in Generation Y (ages 18-29) pay their bills on time every month. (Source: 2008 Financial Literacy Survey National Foundation for Credit Counseling, Inc. and MSN Money)
  • 10% of Americans with mortgages reported being late or missing a mortgage payment in the last year and 7% of adults are either getting calls from collectors or thinking about filing for bankruptcy. (Source: 2008 Financial Literacy Survey National Foundation for Credit Counseling, Inc. and MSN Money)
  • Almost 50% of those who closely monitor their finances say that they learned about personal finance from their parents or at home more frequently. (Source: 2008 Financial Literacy Survey National Foundation for Credit Counseling, Inc. and MSN Money)
  • About 34% of parents have taught their teen how to balance a checkbook, and less than that has explained how credit card interest and fees work and 93% of American parents with teenagers report worrying that their children might make financial missteps such as: overspending or living beyond their means. (Source: Charles Schwab’s 2008 “Parents & Money)
  • Around 69% of parents admit to feeling less prepared to give their teenager guidance about investing than they do having the ‘sex talk’ with them. (Source: Charles Schwab’s 2008 “Parents & Money)
  • Three out of every four Americans say they aren’t saving enough. (Source: 2008 Pew Research Center)
  • 54% of college student respondents had overdrawn their bank account and 81% underestimated the amount of time it would take to pay off a credit card balance by a large margin. (Source: Center for Economic and Entrepreneurial Literacy Survey).

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