BURLINGTON, VT (03/30/2017) Are we financially illiterate? Was our lack of financial acumen a cause of the Great Recession of 2008 and does it continue to undermine our nation's economic health? Unfortunately, the answer is yes to all of these questions, but until now, the extent of our financial ignorance had not been quantified.
April is National Financial Literacy Month and a report issued by Champlain College's Center for Financial Literacy - " The 2016 National Report Card on Adult Financial Literacy" - shows that more than three-quarters of adults live in states with poor grades. This means that too many American adults are deficient in financial knowledge and skills, which leads them to make uninformed and often poor decisions about their money.
John Pelletier, director of Champlain College's Center for Financial Literacy, says the report card assesses the problem nationally, and gives grades to each state based on data gleaned from national organizations that track Americans' financial knowledge, credit, saving and spending, retirement readiness, investing, and levels of insurance.
"The goal of our report is to inform," says Pelletier. "We need to make adult personal finance education a priority among policy makers, financial institutions, the educational establishment and others so that we can begin to build a financially savvy citizenry."
"At my college, we require extracurricular seminars in personal finance, and pre- and post-testing definitively shows student understanding of credit scores, for example, is dramatically improved. If our students carry that understanding into their working lives, there's a better chance that they will do what they can to minimize their personal cost of credit. Doing so, experts agree, can result in lifetime savings of hundreds of thousands of dollars in interest payments, savings that then can be reserved for emergencies, retirement or other financial needs," he said.
Pelletier says the challenge ahead is educating the millions of Americans who misuse credit, don't save for a rainy day or for retirement, don't pay their bills on time or have a budget, or know how to invest or plan for the future.
"The first step in addressing this challenge is to gauge our financial illiteracy, and that it what this report does," he says. "Our hope is that the facts will motivate efforts to improve personal finance education for adults in this nation. It's important to individuals, families and our nation."
No state earned an A grade. The Center's research team used a relative grading system, so even those states with A- or other high grades are merely the best among a group of low-performing states. "In other words," Pelletier notes, "our report shows that our nation has dramatic room for improvement, so one should not be misled by grades." To arrive at the relative grades, 59 data points were drawn from 18 national organizations.
The number of financial decisions an American citizen has to make continues to increase, and the variety and complexity of financial products continue to grow. Adults often do not fully understand debit and credit cards, mortgages, banking, investment and insurance products and services, retirement planning, and many other financial topics.
"Financial literacy among our citizens is vital to our economy so taking advantage of the official designation of April as Financial Literacy Month is a good start and will help to raise awareness, but Americans need financial literacy skills every day," Pelletier added.
For more financial literacy resources visit the National Endowment for Financial Education (NEFE): http://nefe.org/ and Next Gen Personal Finance: http://nextgenpersonalfinance.org/
The Champlain College Center for Financial Literacy also offers resources for high school educators at www.teachfinlit.org/
Established in 2010, Champlain College's Center for Financial Literacy is committed to improving the personal finance knowledge of our nation's K-12 and college students, teachers, and adults, which leads to more sound decisions about spending, credit, debt, investments and complex financial situations, such as buying a home and saving for retirement.
Founded in 1878, Champlain College is a small, not-for-profit, private college in Burlington, Vermont, with additional campuses in Montreal, Quebec and Dublin, Ireland. Champlain offers a traditional undergraduate experience from its beautiful campus overlooking Lake Champlain and more than 60 online undergraduate and graduate degree programs and certificates. Champlain's distinctive career-driven approach to higher education embodies the notion that true learning occurs when information and experience come together to create knowledge.
Champlain College is included in the Princeton Review's The Best 381 Colleges: 2017 Edition. Champlain College is featured in the "Fiske Guide to Colleges" for 2017 as one of the "best and most interesting schools" in the United States, Canada, and Great Britain. Champlain was named one of the "Most Innovative Schools" in the North by the U.S. News and World Report's 2017 "America's Best Colleges and #91 in the overall list of "Best Regional Universities in the North. For more information, visit www.champlain.edu.
John Pelletier Director, Center for Financial Literacy | Champlain College | PO Box 670, Burlington, VT 05402-0670 | www.champlain.edu Office: (802) 860-2744 | Cell: (617) 548-6102 | Home Office: (802) 253-6120 Email: jpelletier@champlain.edu
Stephen Mease, Director of Public Information and News | (802) 865-6432 | cell: (802) 578-8029 smease@champlain.edu | www.champlain.edu
State-by-state grades, with expanded explanations for each state:
Top 10 States: Minnesota, North Dakota*, Utah, Hawaii, Wyoming, New Hampshire, Iowa, South Dakota*, Vermont, Alaska, Massachusetts, Wisconsin.
Bottom 10 States: New Mexico, West Virginia, Texas, Georgia, Florida, Alabama, Oklahoma, Arkansas, Louisiana, Mississippi.
The full report is available here:
www.champlain.edu/centers-of-excellence/center-for-financial-literacy/national-report-card-on-adult-financial-literacy