The Metamorphosis of American Financial Literacy

Several studies and national surveys show that many adults living in America lack some of the most basic knowledge and skills needed to engage in healthy financial decision-making. In fact, according to the Standard & Poor’s Global Financial Literacy Survey, only 57% of American adults can be considered to be financially literate.

In the TIAA Institute-GFLEC Personal Finance Index survey, American adults were given a set of questions focused around real-life financial scenarios. On average, the participants correctly answered only about half of the questions. These findings unfortunately indicate that many adults in the United States lack the ability to apply basic financial knowledge across real-life situations.

But what does it really mean for someone to lack financial literacy? While there are many definitions of financial literacy, determining whether or not a person is financially literate is not as simple as testing their ability to understand inflation, risk diversification or any other number of financial terms, nor is it able to be estimated based on a person’s income alone.

Being financially literate means that a person can use their financial knowledge to secure and improve their financial situation, to successfully address the needs of their families and themselves and to handle and recover from financial shocks—at the bare minimum. A person who is financially literate should be able to meet their everyday financial needs while also doing the planning needed to ensure that they will be able to thrive long-term.

The Reality

Unfortunately, as mentioned above, over half of Americans fail to meet this definition, and the effects of poor financial education and literacy are felt all throughout the fabric of American society. According to ​​the Financial Health Pulse 2020 Trends Report, 67% of Americans are not financially healthy and have very limited ability to respond to a financial emergency.

Approximately 167 million people living in the U.S. are classified as “financially coping” or “financially vulnerable,” and wealth disparities have continued to increase. Women, people with low incomes, and Black Americans have also been hit disproportionately hard by the pandemic, with over a quarter of respondents making under $30,000 per year reporting that they were forced to deplete their savings in order to cope.

While these figures appear bleak, the pandemic – ironically – has brought with it some financial upsides. For example, the chaotic nature of the pandemic created an uptick in family financial planning, with 64% of respondents reporting that their families planned ahead financially in 2020 compared to 59% in 2019. Across the board, people of all incomes have been spending less and saving more since Covid reared its head.

Fintech Continuing the Momentum

While spending slowed and saving increased for U.S. families across the board during the pandemic, this positive change in financial planning was less the result of strong financial education and literacy, and more the result of living through and learning how to manage financial difficulty in the moment. Having said that, many Americans found help through other means.

In a stunning survey from Plaid, researchers found that 59% of Americans are using more fintech applications to manage their finances than before the pandemic hit, with 56% of those surveyed saying that they could not have kept up with their finances and essential day-to-day needs without these apps. Furthermore, respondents who utilized fintech applications to manage their money reported that using those applications saved them time (57%), money (42%), and reduced their stress around managing their finances (37%).

Moving Forward

Increased trust in fintech applications is paving the way for improved financial literacy, as individuals can now easily manage their finances with the help of intelligent new processes and intuitive financial education in the form of digital money management.

In the interest of financial literacy, Fieldpoint Private is proud to partner with Junior Achievement in its’ More Than Money program. During 2022 so far, Fieldpoint colleagues have shared nearly 30 program sessions with many dozens of middle school-aged children where we do business. We look forward to continuing our partnership long into the future.


© 2022 Fieldpoint Private

Banking Services: Fieldpoint Private Bank & Trust. Member FDIC.

Registered Investment Advisors: Fieldpoint Private Securities, LLC, is a SEC Registered Investment Advisor and Broker Dealer. Member FINRA, MSRB, SIPC. Accounts managed by FPS are not FDIC insured.


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