A new survey reveals Americans have limited financial knowledge and stability. An overwhelming majority don’t know the maximum younger people can contribute to a 401(k), and many survive paycheck to paycheck.
The poll, commissioned by Fifth Third Bank and conducted by Research Now, found that 90% of Americans did not know that those under age 50 can contribute up to $18,000 a year to a 401(k) plan.
Although roughly 57.9% of those surveyed said they were financially savvy, only 38.5% knew the annual percentage rate (APR) on their primary credit card, and 60% didn’t have enough savings to survive for at least six months.
“Financial literacy is something our country has, based on this survey, not focused on nearly enough,” says Eric Meermann, a certified financial planner based in Scarsdale, N.Y. “I’d say it’s a really big concern.”
The survey, which had 1,068 responses, was conducted March 5 to 17.
Of those surveyed, 55.8% knew what a credit score measures. That’s a surprising number, Meermann says, considering how many commercials talk about the vital number and how critical the score is when buying items such as a car or a home.
“You should have a focus on getting a good credit score if you want to be able to achieve a lot of things that a lot of Americans consider important,” he says. “The better credit you have, the better terms and fees you can get on your debt.”
The gaps in finances and knowledge among Millennials were also striking. For instance, only 13.3% of that younger generation knew the maximum amount they could put into a 401(k) plan for the year.
“Back in the day, I would see my parents balancing their checkbook and actually going to the bank to make a payment,” says Stacie Haas, a spokeswoman for Fifth Third Bank. “I don’t think you see that any more. I don’t think kids grow up seeing the daily management of money. It happens around them or inside the cellphone or laptop. They’re not understanding there’s a real management level to this. You don’t just make it and spend it.”
If younger people don’t gain a financial education in the home, it’s unlikely they will get it in school, says Camino Smith, Fifth Third Bank’s senior vice president of community and economic development.
“The schools generally aren’t having a lot of financial literacy courses or themes included within the curriculum,” Smith says. “So then, oftentimes, (Millennials) don’t know what they don’t know.”
Fifth Third Bank offers a variety of financial literacy programs, including a “young bankers club” that has taught thousands of fifth-graders basics about money, such as the importance of maintaining a budget. Another program teaches adults how to pay for a home, as well as retirement and higher education.
Such educational efforts are critical. “It’s important for our country as a whole for people to be in a better financial situation,” Meermann says.
“There are a lot of Baby Boomers retiring who are unprepared for retirement, and somehow they’re going to have to be supported or reduce their standard of living,” he says. “And that’s not good for the economy or the country in general. For the next generation, and generations to come, if we make it more of a priority in our education system, I think that could really help.”
Jones, C. (2 May, 2015). Survey: Americans have big gaps in financial knowledge. From USA Today. Retrieved from http://www.usatoday.com/story/money/personalfinance/2015/05/02/americans-have-a-lot-to-learn-about-money/26250315/.