Americans’ Understanding Of Basic Finance Drops To 10-Year Low: Report

Americans’ understanding of basic financial concepts has dropped to a 10-year low, according to a new report.

Concretely, U.S. adults correctly answered less than half (47%) of 28 questions used to determine financial literacy in a study conducted by investment giant TIAA and Stanford University’s Global Financial Literacy Excellence Center.

The figure marks a 5-point drop compared to 2020’s high and is the lowest one since the survey began. A quarter of respondents are now considered to have very low financial literacy, compared to 20% ten years ago.

Surya Kolluri, head of TIAA Institute, told CBS News that low financial literacy is associated with higher levels of debt and other negative outcomes. While the study did not examine why scores dropped, Kolluri said potential factors include misleading information on social media, weaker literacy overall and ongoing financial strains in households.

“Those with lower levels of financial literacy are four times more likely to have trouble making ends meet,” he said.

The study also noted that women and younger adults had the lowest scores. Women answered 44% of the questions correctly, compared to 50% for men.

Adults aged 18 to 29 had the lowest score overall, with 38% of correct answers. Baby boomers had the highest rate with 54%.

LendingTree chief consumer finance analyst Matt Schulz told the outlet that while “plenty has changed in the last decade or more in the financial services space,” the fundamentals haven’t.

“There’s an enormous amount of really smart and insightful personal finance information out there, but there’s also a sea of garbage, and if you don’t know the difference, it can cost you,” he added.