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More than 55% of people who responded to a financial literacy survey reported that they were financially astute and smart about their money. The problem is, many of those who claimed to be financially savvy also reported that they make many mistakes that are considered hallmarks of financial instability.
Overall, the results of the survey revealed a disturbing disconnect between what Americans think and the stark reality of their financial situation.
Among those who think they deserve high marks for financial literacy, 48% had less than $100 in the bank at some time during the past year. Furthermore, nearly 40% said they borrowed funds from friends or family last year. That indicates a risky degree of financial instability, at a time when managing your money is more critical than ever.
The survey, which was organized by the American Institute of Certified Public Accountants(AICPA), found that students were particularly vulnerable to succumbing to financial hardships. This conclusion is especially troubling when you consider that American student loan debt has risen above $1 trillion. A spokesman for the organization’s Financial Literacy Commission did explain that there is a silver lining around these results saying, “This is a great opportunity to teach the next generation how to handle their finances.”
The Impact of Risky Financial Behavior
The AICPAalso found that Americans are suffering the consequences of inadequate financial literacy at a time when budgets are tight and earning power is low. More than 50% of Americans polled said they put off buying a home, starting a family, or making other important financial decisions within the past year or two. That’s a rise of more than 20% compared to 2007, which was just prior to the global credit crisis and mortgage meltdown.
But the pain is not only being felt by young people; the number of Americans who have postponed their retirement has doubled since 2007, according to the organization’s data. Research also indicates that poor money management can have a negative impact on your health as people sometimes decide not to have a medical procedure or visit the doctor because of their poor financial situation.
A National Epidemic
Meanwhile, the Organization for Economic Cooperation and Development (OECD) surveyed close to 30,000 students across 18 different countries, and USA landed in 9th place in terms of financial literacy. Shanghai scored highest, thanks to a proactive educational system that teaches students how to manage their money so that don’t go into debt and fall behind. One of the keys to becoming financially secure, the study found, is determination. If you don’t give up and you continue to work to rid yourself of debt, you are much more likely to succeed and learn financial strategies that are sustainable.
While 70% of American students go to schools that offer financial education, only 50% of students in Shanghai have that kind of education available in their school systems. The takeaway from that data is that financial literacy often depends on learning outside of school. That’s another reason why seeking out free resources – such as those offered on CompareCards.com – can give you a powerful boost to your financial literacy by helping you save, manage a budget, and make smarter, more informed financial choices.
You Can Overcome Debt
Another recent survey of Americans by MyBankTracker.com revealed that 30% of respondents would be willing to sell their body organs in exchange for not having any more student loan debt. Thankfully, there is an easier and safer way to improve your financial situation, and it starts with putting in your own efforts to improve your financial literacy.
With the right knowledge and a toolkit of expert tips and advice, it’s possible to avoid getting into debt altogether. For those of you that are already in troubled financial waters, don’t worry; you don’t have to sell your organs to get out of debt!