A study by The Ohio State University has found that financial literacy in the US is declining even as more Americans feel more confident about their financial expertise.
Financial literacy declining in the US
Researchers polled various American demographic groups between 2009 and 2018 on their level of objective financial awareness on four different occasions. However, the proportion of persons who felt their level of financial literacy was above normal rose from around 15% in 2009 to about 21% in 2018. But these people performed worse than normal on the test.
Study co-author Sherman Hanna said that the findings make it unclear whether enough or the appropriate things are being done to inform the public regarding the fundamentals of managing money required to maintain a family. In addition to a decline in scores on a financial literacy test, more and more people mistakenly believe they know a lot more than they do.
When questioned about money, most people said they didn’t know. So, in collaboration with the University of Alabama’s Kyoung Tae Kim and York University in Toronto’s Sunwoo Lee, Professor Hanna used National Financial Capability Study (NCFS) data to evaluate the financial beliefs and understanding of Americans.
The study evaluated data sets from 2009, 2012, 2015, and 2019, revealing that financial literacy had dropped in all four surveys. Moreover, the decline in financial knowledge was confirmed in various ways, with respondents allowed to respond as “don’t know.” Surprisingly, the number of “don’t know” has increased marginally between 2009 and 2018.
Americans overconfident about their financial literacy
The findings show that respondents in 2012 and 2015 believed they had more financial knowledge than those in 2009 despite researchers controlling for other aspects. Notably, the respondents polled in 2018 didn’t have any significant differences from those of 2009 regarding their knowledge about finances.
Although this survey unequivocally shows that Americans’ financial education is declining, it is still unknown why that is so. The well-documented decline in arithmetic proficiency in the US is one hypothesis that could apply.
