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 www.NFCC.org .

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

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.