If we told you that 59% of Georgians lack a rainy day fund that covers three months of expenses in case of job loss or sickness, would you believe us? Would you agree there may be a problem if 19% of GA households spent more than they earned over the past year? [And that doesn’t include the purchase of a home, car or other big ticket item.]
This data is from a study by the FINRA Investor Education Foundation in 2009, 2012, and again in 2015 (usfinancialcapability.org) with results published in July 2016. In summary, they concluded Americans demonstrate low financial literacy and have difficulty making good financial decisions.
Here are some additional findings specific to Georgia:
14% of homeowners owe more than their home is worth (underwater)
36% with credit cards only paid the minimum at some point in the last year
52% did not comparison shop when applying for their newest credit card
66% of participants could only answer up to 3 out of 5 questions correctly. Topics covered compound interest, inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.
The good news, if you want to think of it that way, is that the results have improved in each of the three years (’09, ’12 & ’15) of the study. Also good news, according to the Council for Economic Education’s survey of states, is that in 2007 Georgia set standards requiring personal finance and economic education in our high schools.
That’s a good start, but honestly, we would like to see a whole course dedicated to personal financial literacy as a requirement for a high school diploma. The data supports our perspective that young adults are not universally taught money basics; for example - managing a budget, prioritizing wants versus needs, or the time-value of money.
Want a Reality Check? Have a high school student you know fill out the answers to a 10-question budget here www.jumpstart.org/reality-check and see what their reality is.
Our purpose for writing this column each month is to educate and inform, to inspire, to encourage action, and to help you make prudent choices through meaningful conversations about money. Life’s a journey. Navigate it wisely.