Permanent Value

Week in Review 7/15/13

Bruce Doole
July 15th, 2013

Many Clients Lost Without Financial Planners

While roughly 75% of Americans have “positive perceptions” of their own financial knowledge and math skills, a meager 14% were able to correctly answer five financial literacy questions compiled by FINRA’s investor education foundation. Advisors point to the dire need for financial literacy classes at US high schools and colleges.

Take a stab at the regulator’s test at, composed from 2012 and 2009 state-by-state surveys, each of which were national online surveys of more than 25,000 adults in the US.

FINRA’s survey found a significant disparity in financial capability across state lines and demographic groups. According to the findings:
• Citizens of California, Massachusetts and New Jersey who were surveyed are the most financially capable. Those states ranked in the top five among all states in at least three of five measures of financial capability.
• Mississippi stood out as the least financially capable state, placing in the bottom five in four out of five measures. Arkansas ranked in the bottom five in three out of five measures, and Kentucky ranked in the bottom five in two out of five measures.
• Younger Americans, especially those who are 34 and under, are more likely to show signs of financial stress, including taking a loan or hardship withdrawal from their retirement account or making late mortgage payments.
• Younger Americans are more likely than older Americans to have unpaid medical bills. Of those surveyed, 31% of Americans aged 18-34 reported having unpaid medical bills compared to 17% for Americans aged 55 or older.

The regulator notes that the five measures of financial capability used to rank the states measure how well Americans are managing their day-to-day finances and saving for the future. The national averages among survey respondents for these key measures are the following:
• Fewer than half (41%) of Americans surveyed reported spending less than their income.
• Over a quarter (26%t) of Americans reported having unpaid medical bills.
• More than half of Americans (56%) do not have rainy-day savings to cover three months of unanticipated financial emergencies.
• Over a third of Americans (34%) reported paying only the minimum credit card payment during the past year.
• On a test of five basic financial literacy questions, the national average was 2.88 correct answers.

“This survey reveals that many Americans continue to struggle to make ends meet, plan ahead and make sound financial decisions — and that financial literacy levels remain low, especially among our youngest workers. No matter how you slice and dice it, this rich, new dataset underscores the need for us to continue to explore innovative ways to build financial capability among consumers,” says FINRA Foundation Chairman Richard Ketchum in a statement.
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