LIMRA Reports Financial Literacy Failings

Most Americans probably do not know that April is Financial Literacy Month, but only about one-third are actually financially illiterate, a recent LIMRA quiz of 10 multiple-choice and true/false questions found. More than half of those polled had a mid-level understanding of financial topics, one in five had a low level of financial literacy, and one in eight correctly answered nine or more of the questions.

From this quiz, LIMRA reported:

• 36% of respondents answered five or fewer questions correctly;
• 27% of consumers—31% of men and 23% of women—have a high level of financial literacy;
• Older respondents (age 55 and older) are nearly twice as likely as those younger than 55 to have a high level of financial literacy—almost 40% versus more than 20% of consumers; and
• Unsurprisingly, Americans who worked with a financial professional, had a college education and more than $100,000 in household assets were more likely to have a higher financial literacy.

Asked to rate their own knowledge of investments and financial products, LIMRA found that many consumers underestimated themselves. One-quarter claimed they were “not at all knowledgeable” about investments and financial products, but nearly 60% of those actually answered five to seven quiz questions correctly. However, of the 6% who rated themselves as “very knowledgeable,”  almost one-third scored poorly in the quiz.

“As Americans are required to take greater responsibility for their retirement saving, the issue of financial literacy becomes increasingly important,” said Alison Salka, corporate vice president and director LIMRA Retirement Research. “Our study confirms what previous studies have shown: People need more help understanding financial concepts.”

Sara Kelly