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Financial Illiteracy Costs Americans an Average of $1,819 Per Year

Originally Published Jan. 19, 2023 on The Ascent by Motley Fool, by Lyle Daly



What happened

American adults lost an estimated average of $1,819 because of financial illiteracy in 2022, according to a survey by the National Financial Educators Council (NFEC). Respondents were asked how much money they think they've lost during the year due to a lack of personal finance knowledge. The available choices and results were:

  • $0 to $499: 61.80%

  • $500 to $999: 7.23%

  • $1,000 to $2,499: 7.96%

  • $2,500 to $9,999: 7.98%

  • $10,000 or more: 15.04%

The estimated average of $1,819 is the highest in the six years that the NFEC has conducted the survey. Applied to the 254 million adults in the United States, it would indicate that financial illiteracy costs Americans more than $436 billion annually.

"Financial illiteracy is an epidemic in the U.S., and it's coming at a time when the economic climate is changing rapidly," said Vince Shorb, CEO of the NFEC, in the press release announcing the survey results.

So what

It's understandable why so many adults have gaps in their financial knowledge. Lots of important subjects, such as banking and credit cards, normally aren't taught in schools. Unless you have someone to explain them to you, or you seek out this information on your own, there could be areas where a lack of knowledge leads to financial mistakes.

Based on the survey results, financial illiteracy doesn't affect everyone equally. The good news is that the majority (61.80%) of Americans estimate they lost less than $500 due to financial illiteracy. However, others were hit much harder, especially the 15.04% who estimated they lost $10,000 or more.

Now what



If you'd like to improve your financial literacy, a good place to start is The Ascent's personal finance guides and advice. These cover a range of important topics, from things that beginners should know to more advanced information, including:

  • What is a savings account?

  • How do brokerage accounts work?

  • How to pay off debt

You may want to focus on one specific area, like any knowledge gaps you have. For example, credit card interest and fees are one of the biggest issues for Americans, with an estimated annual cost of $120 billion. If you don't know much about credit cards, it makes sense to learn about how credit cards work so that you can use them to your advantage and avoid paying fees.

Most importantly, know that anyone can become financially literate. It's not too complicated to learn how to manage money and even how to build wealth. It's just a matter of finding quality resources and spending a little time learning from them.

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