We’ve already been warned that the state of financial literacy is “pretty dismal” in the U.S. If that isn’t bad enough, it looks like we understand even less about money and finances as we age.
So says Annamaria Lusardi, a professor at Dartmouth and George Washington University (OK, I’m partial, it’s my MBA alma mater), who is an internationally recognized expert on financial literacy issues. Lusardi found that less than one out of five baby boomers could answer fairly simple financial queries, like calculating the amount of interest you should earn from a savings account.
According to a recent article on her research appearing in the New York Times, “Ms. Lusardi finds that while those 23 to 28 years old are generally more financially literate than other age groups, the general level of numeracy is “pretty dismal …considering the complexities of the calculations involved in many financial decisions.”
Ms. Lusardi’s work “examines just how well Americans and citizens of other countries understand the basic financial concepts that underpin decisions about mortgages, saving for retirement, credit card borrowing and other economic needs.”
For those of us on the front lines of personal finance, we already know the truth. Most Americans are not equipped with the knowledge or expertise to make informed decisions about key aspects of their financial lives. That’s why one of our most important jobs as financial planners is bringing objective and unbiased information to our clients so that they can make good decisions about their financial future, and why we’ve chosen to practice on a fee-only basis to help avoid the conflicts of interest that plague so many in our industry.