Financial literacy survey reveals troubling contradictions

The results of the National Foundation for Credit Counseling’s (NFCC) fifth annual Financial Literacy Survey released this week suggest some troubling contradictions.

Reversing the trend witnessed over the past few years, 26 percent of U.S. adults now report that they are spending more than they did one year ago, shedding some of the more conservative spending habits they adopted during the recent recession. At the same time, more than two in five Americans grade themselves as C, D or F in their knowledge of personal finance, acknowledging that they lack the know-how to make sound financial decisions.

An admitted lack of personal finance skills coupled with increased spending is a recipe for financial disaster. The good news is that just over three in four, 76 percent, recognize that they could benefit from the advice of a financial professional. Hopefully, this indicates that Americans will take the steps necessary to improve their financial literacy.

Whether it is due to the stubbornness of entrenched behaviors, the release of pent-up consumer demand, or other factors, the survey reveals that Americans are spending more, saving less, and still carrying credit card debt. As a result, it is not surprising that nearly half of Americans are concerned about having insufficient retirement and “rainy day” savings.

Credit card debt continues to present challenges for many Americans. Although just over two-thirds of adults pay for most purchases with cash or debit cards, two in five still carry credit card balances from month to month.

Regarding housing, a solid majority, more than four in five Americans, believe that certain circumstances warrant defaulting on a mortgage, including reasons such as having been misled about the terms of their loan or no longer being able to afford the monthly payment. Among homeowners carrying a mortgage, nearly three in ten report that the terms of their mortgage differ from their initial expectations. This combination of homeowners’ confusion surrounding their mortgage terms and Americans’ acceptance of defaulting on mortgages could wreak havoc on a housing market still struggling to recover.

It is disturbing to note that more than half of adults do not maintain a budget or track their expenditures, the basic building blocks of financial stability. Since April is Financial Literacy Month, it is the ideal time for consumers to take control of their financial future, and for all Americans to invest in America’s collective future through a national commitment to financial education.

The 2011 Financial Literacy survey was conducted by telephone within the United States by Harris Interactive on behalf of the NFCC between March 4 and March 7, 2011 among 1,010 adults ages 18+. Results were weighted for age, sex, geographic region and race where necessary to align them with their actual proportions in the population. The full survey will be available Monday, April 4, at .

Kim McGrigg is the former Manager of Community and Media Relations for MMI.