If you didn’t already know it (and most people don’t) April is Financial Literacy Month and, because of that, many financial institutions are rolling out their yearly financial education programs for their customers.
That being said, the fact that these organizations even need to do this shows that, where financial literacy is concerned, with Americans it’s still quite low, especially among the younger generation. While it’s certainly not a bad thing to get more financial education, the fact is that many years’ worth of financial literacy initiatives haven’t made a noticeable improvement in the financial knowledge of the average American consumer.
For example, a recent survey done by the National Foundation for Credit Counseling found that just over 60% of Americans still don’t have a budget, the largest percentage that they’ve found in the last six years. In the same survey over 40% of respondents rated themselves a grade C or worse as far as financial know-how.
“We’ve been beating our heads against the wall for decades,” said Gail Cunningham, a foundation spokeswoman.
The question is this; why, with all of these financial initiatives, are Americans still lagging so far behind?
Annamaria Lusardi, a professor at the George Washington University School of Business, says that, when it comes to financial literacy, progress simply takes time. “We don’t give financial education lessons and people run back to their offices and change their financial behaviors,” she said. “That’s not how it works.”
As an example, she points to the anti-smoking campaign that started years ago as a gauge of how long behavior among a large group of people takes to change. (The answer; a long time.)
“We had lots of costs associated with people having to have long and extensive treatment,’ she said. But despite warnings from the Surgeon General and myriad public health campaigns, “look how long it took to decrease the smoking. Many years later, I think we have made progress.”
There are differing opinions of course and one of them comes from the senior vice president for public affairs at Fidelity Investments, Gary Blank. He says that “We don’t have a concerted national approach across the country that is touching every student, or a concerted national approach across the country that is touching every adult,” adding that “Right now it is piecemeal.”
One of the biggest problems might simply be that the fact that only $2. per American consumer is being spent every year on financial education, as far as a study by the Consumer Financial Protection Bureau found. What that means is, when it comes to financial knowledge, very little is actually reaching consumers and thus the education level remains low.
On the other hand, $17 billion is spent annually by financial service firms on marketing their consumer financial products, approximately $54 per person and, with disparity like that, the message of education is literally being drowned out by marketing pitches that offer nearly impossible returns.
“Managing your financial life is hard,” said Gail Hillebrand, the bureau’s associate director of consumer education and engagement. “We do get a lot of information on financial products and services from the providers of those services. In that context, it’s not surprising that we have a ways to go.”
There certainly is a way to go and, until more lessons about finances, financial security and how to handle money are learned by the American consumer, we’ll continue to remain a country deeply in debt.