NEW YORK–A new study estimates that nearly two-thirds of Americans couldn’t pass a basic financial literacy test, meaning they got fewer than four answers correct on a five-question quiz.
Perhaps even more disturbing: the percentage of those who can pass the test has fallen consistently since the financial crisis to 37% in 2015, from 42% in 2009.
These findings are part of the National Capability Study released by the FINRA Foundation, which surveyed 27,564 Americans from June through October of last year. FINRA is a quasi-government organization that regulates brokers and Wall Street.
A Big Challenge
A big challenge for many in the survey was how bonds work—just 28% knew what happens to bond prices when interest rates fall. (They rise.) The survey also found that about half of all Americans appear to be able to answer basic questions about financial risk.
In addition to financial literacy, the study found that many Americans say they have recovered from the financial crisis. Respondents to the survey who reported no difficulty in covering monthly expenses and bills increased 12 percentage points to 48% in 2015 from 36% in 2009. The percentage of respondents with emergency funds has increased to 46% from 35% over that same time. Moreover, more than half of those using credit cards reported they pay off their balance each month—the highest percentage since the survey began, the study found.
Amid the positive numbers, however, the study’s findings are consistent with other research which has shown that even eight years after the financial crisis significant segments of the population, including African Americans, Hispanics, women, Millennials, and people lacking a high school education, report they are worse off than before the recession.
Among the findings:
- Women are more likely to put off medical services such as seeing a doctor, buying prescriptions, or undergoing a medical procedure due to cost. This leaves more than one in five Americans, or 21%, with unpaid medical debt, according to the study.
- Thirty-nine percent of blacks and 34% of Latinos have used such high-cost forms of borrowing as pawn shops and payday loans, compared with 21% of whites and 21% of Asians.
- Twenty-nine percent of Millennials said they had been late in paying their mortgage, vs. 16% of those ages 35 to 54.
- Forty-five percent of all respondents with no college education said that if they had an emergency requiring them to pull together $2,000 within a month, they wouldn’t be able to do so.