Financial literacy among American adults remains low, according to recent studies
, with most individuals only being able to answer half of the questions correctly when quizzed on personal finance. The Personal Finance (P-Fin) Index, a joint initiative of the TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business, has been testing financial literacy nationwide since 2017.
The 2022 study found more adults than ever couldn’t correctly answer more than 7 of the 28 questions asked.
Similarly, the National Financial Literacy Council (NFEC)
found that across a total of 73,171 people surveyed from all 50 states, the average score was 63.52%. Over half (52.7%) of participants failed the test entirely by scoring below the 70% threshold. Car insurance super app Jerry
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Examining financial literacy across ages reveals that it is especially poor among individuals in early adulthood. Gen Z and Gen Y were only able to correctly answer 45% of the questions asked.
Adults age 51-plus had the highest financial literacy—they managed to score an average of 78%.
The test questions targeted these 10 subjects outlined in the NFEC’s Financial Literacy Framework & Standards
: Savings, expenses, and budgeting
Risk management and insurance
Investments and personal finance planning
Economic and government influences
Understanding risk remains the area where people struggle most. Only one-third of questions revolving around risk were correctly answered.
Vincent Shorb, CEO of the NFEC, has said, “These nationwide test results indicate that, on average, many of our young people lack the basic knowledge to make qualified financial decisions. Testing is just an indicator of content knowledge.
“But unlike other subject matter taught in schools, financial literacy requires more than just understanding content. It requires learners to be able to modify their daily financial behaviors and have enough knowledge to make confident decisions about money."
Massachusetts, Oregon lead states in financial literacy
Age isn’t the only factor that demonstrates distinct financial literacy levels. Residents of certain states scored better than others, too.
Some of the higher-ranking states include Texas
, where 2,789 participants averaged 67.22%; Oregon
, where 1,057 participants averaged67.40%; and Massachusetts
, where 1,171 participants averaged 68.30%. On the opposite end of the spectrum, residents struggle more with financial literacy in the following states: Nevada
(59.46%), Georgia
(59.44%), and Arkansas
(52.64%). How low financial literacy can hurt you
While these studies required taking tests similar to those you’d take in high school, having low financial literacy can lead to real-world problems and far-reaching consequences.
The P-Fin Index emphasizes the importance of financial literacy for financial well-being, demonstrating that those with a very low level (as opposed to those with a very high level) are:
3x more likely to be constrained by debt
3x more likely to struggle with a $2,000 financial shock
4x more likely to spend 10+ hours a week on issues related to personal finances
6x more likely to have difficulty making ends meet
Even everyday expenses like groceries, bills, and insurance can be far more challenging to deal with for those with low financial literacy.
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