Americans Falling Behind in Financial Literacy

November 26, 2009 Updated: October 1, 2015

More than half of the Americans interviewed have little training in personal finance. (Tim Boyle/Getty Images)
More than half of the Americans interviewed have little training in personal finance. (Tim Boyle/Getty Images)
WASHINGTON—Despite a modest bound in the stock market and the United States economy easing out of its recent recession, U.S. workers may have become more apprehensive about their personal finances.

“Despite a 15.9 percent return on the S&P 500 in Q2, employees are experiencing increased financial stress, more serious debt issues, and trouble making ends meet,” said Liz Davidson, CEO of Financial Finesse, in a statement. Financial Finesse is a provider of financial education based in Manhattan Beach, Calif.

Employees are more and more pessimistic regarding their financial situation. Almost all customers of the Financial Finesse learning center reported being stressed out about financial obligations and the lack of personal finance knowledge.

Lacking Financial Savvy

“Most employees are woefully ignorant about their retirement distribution options and the tax consequences as well as pros and cons of each. Those who are retiring early are often unaware of penalties involved in early withdrawal,” Davidson said in her recent testimony before the Department of Labor’s ERISA Advisory Council Working Group on Financial Literacy.

Close to 90 percent of Americans have no clue if they can retire comfortably as the majority are already dipping into their retirement accounts. They worry about making ends meet, according to a 10-year research project conducted by Financial Finesse.

More than half of the Americans interviewed have little training in personal finance and have no idea how to invest in stocks, bonds, and mutual funds. Almost 75 percent of those surveyed did not have an understanding of investment risks and are uncertain about their own risk tolerance when taking into consideration personal wealth and income potential.

The distressing news continues. More than 40 percent of American workers spend more than they earn on a monthly basis and are unable to make ends meet. Only 38 percent of interviewees had enough funds set aside to get them through a typical financial crisis, and 23 percent are behind in paying their obligations every month, trying to live from paycheck to paycheck.

“Employees’ lack of savvy contributed to the current financial crisis, with millions of Americans taking on mortgages they couldn’t afford, incurring too much high-interest-rate credit card debt, investing too aggressively in the stock market and failing to set up a strong financial foundation,” according to a Financial Finesse report.

Financial Help

More than 68 percent of all calls to the Finesse Center were from women asking for ways to get out of debt. Some were so deep in financial stress that they worried about bankruptcy or foreclosure.
“Most calls today center around resolving critical financial problems, such as cutting expenses in the wake of layoffs, pay decreases, and furloughs, avoiding bankruptcy and foreclosure, taking out 401(k) loans to pay for day-to-day expenses, and other such urgent financial matters,” said the Finesse report.

Calls to the firm’s Online Financial Learning Center have increased by 97 percent. Requests for help concerning loan defaults have increased 100 percent since the beginning of this year and 66.7 percent when it comes to looming bankruptcies and foreclosures. Calls about other financial matters have increased from 9 percent to 18 percent during the same time period.

Employee Help Lines

Companies, including Aetna Inc., the Boeing Employees Credit Union, Children’s Memorial Hospital in Chicago, M.A. Mortenson Company, and the NFL Players Association (NFLPA), have launched financial education programs for their employees.

“There’s been a long standing need for this kind of financial education for our members who have unique circumstances that make financial planning particularly difficult,” DeMaurice Smith, NFLPA executive director, said in a November press release. NFLPA provides assistance to current and former players for the National Football League.

NFL players are not guaranteed contract renewals and with possible injuries that might bring an end to their football careers, financial planning is of great importance, Smith explained.

The Boeing Credit Union, which launched its financial planning program 10 years ago, has six full-time financial trainers on board “to provide what is arguably, the most comprehensive financial education program in the credit union industry,” the company says.

Boeing Credit Union members have access to biweekly workshops, videos, webcasts, and online material that discusses any financial subject they might come across.

Aetna teaches its employees financial independence through one-on-one meetings, workshops, and webcasts that teach financial subjects of all kinds.