Financial literacy is en vogue these days, with states like Florida becoming one of the most recent and largest states to mandate personal finance courses for high schoolers. It’s likely a good thing, too, as nearly every worker in the U.S. is stressed out about money, and a possible recession is looming.
Yet, even after some financial belt-tightening and evidently learning to live with less during the pandemic, many Americans may be less equipped to deal with their finances than a year ago, according to data from the BrightPlan 2022 Wellness Barometer Survey, which polled 1,500 knowledge workers in the U.S.
A particularly worrisome finding? Only 13% of workers were able to answer at least four out of the five following financial literacy questions correctly:
- You should pay off credit cards each month.
- Funds are taken from a debit card immediately.
- 15-year mortgages require higher monthly payments that reduce total interest.
- Credit card interest is the price you pay for borrowing money.
- 401(k) contributions are not taxed until withdrawal.
All of the above questions are true. A year ago, in 2021, 20% of workers were able to answer four of those five questions correctly, for a one-year decline of 7%. Sixty-one percent of respondents were able to correctly answer that they should pay off their credit cards each month—the most correctly-answered question–while only 41% were able to correctly say that 401(k) contributions are taxed when withdrawn.
Additionally, the survey finds that more employees are stressed about their finances, and that stress is mostly being driven by inflation and retirement planning worries. While no personal finance class is going to help lower prices, furthering financial literacy education could help some people learn to better cope with stress related to financial planning.
The findings of the survey–which, again, show an apparent decline in respondents’ abilities to correctly answer financial questions–are seemingly at odds with expanding opportunities to learn about money. Financial courses are more available than ever before, and are now required, in some form, in 25 states.
While this is only a single data point from a single survey, it may be a troublesome sign, given that we’re on the precipice of an apparent economic slowdown, with corporate earnings reports showing that retailers are suffering due to rising costs, some employers laying off staff, and the markets being in a relative free fall since the beginning of the year.
An economic downturn, coupled with a financially unprepared population, could be disastrous, especially given that there may not be significant stimulus programs implemented to help keep households afloat financially after the government went all-out during the pandemic.