April is Financial Literacy Month, a time to highlight the importance of financial literacy and encourage Americans to learn and establish healthy financial habits. This month, many corporations, government agencies and financial institutions will promote resources and launch educational initiatives aimed at improving Americans’ financial health — and many people could use the help.

Understanding finance is more important than ever. Over the past five to six years Americans have lived through the worst financial crisis since the Great Depression, experienced the worst chronic unemployment in six decades, and collectively lost $16 trillion in household wealth. These realities have only emphasized why learning about personal finance is a necessity.

A recent study by the education technology company EverFi and sponsored by Higher One found that students who were taught financial literacy education in high school scored significantly higher than their peers on financial knowledge questions and are more responsible when it comes to money.

More than 65,000 first-year college students across the U.S. took the survey on banking, savings, credit cards, school loans as well as answered questions designed to assess students’ financial knowledge. Results indicate that financial literacy education in school has a big impact on students’ attitudes towards money and their money management behaviors beyond the high school years.

“These results show the need to start financial literacy education in the K-12 setting and for institutions to provide educational programs early on in a student’s college experience,” said Mary Johnson, director of Financial Literacy and Student Aid Policy at Higher One, in a press release. “It’s critical that young adults receive a sound financial education as they make long-lasting decisions about college and how to finance their education.”

Currently, only 17 states require high school students to take a course in personal finance, according to the Council of Economic Education. Financial literacy advocates are pushing more states to improve their coverage and requirements. Last year, nearly 20 states enacted legislation or adopted resolutions regarding financial literacy.

California required its state board of education to integrate financial literacy into existing curriculum. Kentucky adopted a resolution encouraging its board of education to require financial literacy courses in every school. Florida revised requirements for high school graduation to include financial literacy and an industry certification program of study. But only four states — Missouri, Tennessee, Utah, Virginia — actually require high school students to take a personal finance course in order to graduate.

Why are many Americans not financially savvy?

While states continue to make strides to implement financial literacy courses into school curriculum, more must be done to improve Americans’ financial competency. Unfortunately, despite the fact that Americans have spent millions of dollars trying to improve financial literacy, many people lack financial capability. Part of the problem is that many of the resources and initiatives that have been launched to improve Americans’ financial literacy are financed by big financial institutions whose intentions might be questionable. Many of these institutions sell complicated financial products that are harmful to confused consumers. And given the partisan environment in Washington, lawmakers who have pushed financial literacy education might be motivated more by politics than meaningful change.

As we have seen from the recent financial crisis, the rug can be pulled from under you at any time. Misunderstanding the basic concepts about money, debt, compound interest, and many other financial topics can have severe financial consequences. Increasingly, more Americans are borrowing money from risky, high-interest payday loan businesses, not saving enough for retirement, and piling on student debt. As consumers face a more complex financial environment, it’s essential for Americans to focus on financial literacy.

10 Sobering discoveries about Americans and finance

If there was any doubt about the sad reality of America’s financial literacy, consider these 10 sobering findings:

  1. In describing what getting ahead means for them, nearly two-in-three Americans mention financial indicators, like financial stability, savings, retirement, covering bills, providing for a family, and other monetary items. — All State-National Journal Heartland Monitor Poll, 2012
  2. Forty-one percent of U.S. adults, or more than 92 million people living in America, gave themselves a grade of C, D, or F on their knowledge of personal finance. — National Foundation for Credit Counseling’s Consumer Financial Literacy Survey, 2014
  3. Less than half of the participants in a survey of 5,000 people could correctly answer eight basic financial literacy questions. — National Association for Retirement Plan Participants Study, 2014.
  4. Less than one in five U.S. adults consider themselves a Highly Disciplined financial planner – i.e., they know their exact goals, have developed specific plans to meet them, and rarely deviate from those plans. — Northwestern Mutual Planning and Progress Study, 2014
  5. In a survey of 25,500 participants in 28 countries, the U.S. ranked dead last when it came to the question: “To what extent would you say teenagers and young adults in (Country) are adequately prepared to manage their own money?” And 70.5 percent of respondents said American teens don’t understand money management basics. – Visa’s International Financial Literacy Barometer, 2012
  6. For every dollar spent on financial education, $25 is spent on financial marketing. — Consumer Financial Protection Bureau, 2013.
  7. A survey of 25,000 Americans adults found that 61 percent do not compare offers or collect information from more than one company when shopping for credit cards. — FINRA’s National Financial Capability Study, 2012
  8. Investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud. — Securities and Exchange Commission’s Study Regarding Financial Literacy Among Investors, 2012
  9. A survey of 1,000 individuals over 25 found that more than half of workers report they and/or their spouse have less than $25,000 in total savings and investments. — Employee Benefit Research Institute’s Retirement Confidence Survey, 2013
  10. A survey of 9,523 individuals found that 28 percent of respondents had taken on credit card debt to keep up with student loan payments. — Young Invincibles’ Borrower in Distress: Survey on the Impact of Private Student Loan Debt, 2013

To help improve your financial literacy, talk with a financial planner, explore free online tools, and check out these government websites and resources.

Related Articles
  1. Retirement

    The 5 Best Retirement Communities in Asheville, N.C

    Learn about some of Asheville, North Carolina's best retirement communities and discover why the area is such a popular retirement destination.
  2. Retirement

    Why Are Annuities Important for Retirement?

    Understand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
  3. Retirement

    What Does It Cost to Retire in Belize?

    Find out how much monthly income you need to retire comfortably in Belize, a subtropical paradise with jungle landscapes, white beaches and crystal blue water.
  4. Professionals

    Social Security COLA in 2016? Not Likely

    A cost of living increase for Social Security doesn't look likely in 2016. Here's what retirees should know and what they can do about it.
  5. Professionals

    This Group is the Most Underprepared to Retire

    More than any other demographic, this group is woefully underprepared for retirement. Here's what they can do to change that.
  6. Professionals

    Advisors: Why Older Clients Need Housing Help

    When was the last time you talked to your clients about housing in retirement?
  7. Professionals

    Why Near-Retirees Shouldn't Sweat the Volatility

    With the stock market bumpy, some folks nearing retirement might be nervous. Here's how to create some wiggle room for your portfolio.
  8. Professionals

    How to Create a Retirement Co-Op in Your Community

    As the retirement boom continues, retirement co-ops are growing in popularity. Here's how to set one up in your community.
  9. Retirement

    4 Reasons Why Americans Retire in Costa Rica

    Understand why more and more Americans are deciding to retire in developing countries. Learn about the top five reasons why Americans retire to Costa Rica.
  10. Professionals

    Is Delaying Social Security Until 70 a Good Idea?

    Soon to be retirees are often told it's best to wait until age 70 to collect Social Security. Here's why this is not always the best advice.
  1. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  2. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  3. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  4. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  5. Do financial advisors get paid by mutual funds?

    Financial advisors are reimbursed by mutual funds in exchange for the investment and financial advice they provide. A financial ... Read Full Answer >>
  6. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!