Financial literacy in the U.S. continues to decline, with the largest gap existing amongst millennials and those in the lower income category. Jennifer Tescher, President and CEO of the Center for Financial Services Innovation joins Moe to discuss the most concerning consumer obstacles and the role that CFSI is playing to help large financial services providers reimagine how they add value to Americans.
Financial Illiteracy in America
On November 18, 2015 The Wall Street Journal published an alarming article highlighting the key findings of this year’s global survey of financial literacy around the world. The joint project between Standard & Poor’s Ratings Services, Gallup World Poll, the World Bank, and the Global Financial Literacy Excellence Center at George Washington University left me wondering why, as Americans, we don’t put more emphasis on educating our youth about money. A basic, five question survey on such topics as inflation, interest, compounding, and financial diversification was administered to 150,000 adults in 148 countries, and here’s what we learned:
In the U.S., only 57% of those surveyed passed, as compared to over 70% in Norway, Denmark, and Sweden.
The U.S. shows different levels of financial literacy according to gender, income, and education. Americans with less education and lower incomes have financial literacy levels below their counterparts in other wealthy countries.
U.S. adults have a relatively weak understanding of interest even though U.S. credit card use and student debt is among the highest in the world. Interest is the least-understood topic in the U.S., with 40% of adults answering the interest topic incorrectly.
In the U.S., 60% of adults have a credit card, yet only 57% of them correctly answer the interest topic.
About 55% of U.S. adults do not save for retirement.
In the U.S., only 62% of adults who use housing finance – such as a mortgage – from a bank or other financial institution correctly answered the interest questions.
Broadly speaking, millennials in the U.S. ranked 21st amongst developed countries in their financial literacy.
To take this a step further, consider that nearly one in three Americans, according to the FDIC, are unbanked and/or underbanked; meaning that they had a bank account but also used alternative financial services outside the banking system. Anyway you measure it, financial health in America is severely ailing; which makes the work of Jennifer Tescher and her team at The Center for Financial Services Innovation that much more vital. Since 2004, CFSI has made it its highest priority to speak for the underserved; and as you’ll discover throughout my conversation with Jennifer, it’s technology that’s igniting a promising new approach towards improving the financial lives of everyday Americans. Here’s what we discuss:
A decade of progress at CFSI
What’s most responsible for the declining financial health in America?
Closing the trust gap between the American consumer and financial institutions
The modern American Dream
The shift from financial education to financial capability
The four compass principles & their impact
What financial literacy looks like in 2016