Many Americans are Ill-informed About Their Personal Finances.
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To many Americans, it is normal to have an auto loan payment. Many folks think that this is just the way it is, to roll from one car to the next, always having a payment. But what if it’s really not supposed to work that way?
The right way to pay for the automobile is with cash. Now, it’s not that easy to get off this auto-loan merry-go-round, but it can be done. Once you pay off that car loan, continue making payments, but to yourself. This way you save the money that you will need the next time you buy a car, only this time you will pay cash for it. This is just one example of the things that people do not understand about managing their money.
A new report by the Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA) found that 61 percent of adult Americans were unable to correctly answer more than three of five basic financial literacy questions. In conducting the online surveys of more than 25,000 adults in 2012, FINRA focused on four areas: making ends meet, planning ahead, managing financial products, and financial knowledge and decision-making.
The survey showed that 56% of Americans don’t have an emergency fund to cover at least three months of expenses, and only 49% of credit card users pay their credit card balances in full each month. An especially troubling statistic is that nearly one third of respondents use payday loans to cover expenses between paychecks. The interest rates associated with these financial products typically come with three or four digit interest rates and can entrap the borrower into an unending payment cycle.
The survey had some good news, too. More people (40% of respondents) reported they aren’t having trouble covering monthly expenses now, compared to only 36% in the survey’s previous version, conducted in 2009.
These surveys are not meant to make us feel incompetent, but rather to highlight that Americans have to know so much more about managing their money than in past generations. Managing your finances can be complex and challenging.
So, what do you know?
Take the quiz yourself and find out. Follow the link here: www.usfinancialcapability.org. If you don’t score well, finds ways to become better informed so that what you don’t know won’t continue to cost you so much.