More than half of Americans haven’t bought a home or made an investment in three years — because they didn’t know they could.
Low confidence in financial knowledge prompts 7 in 10 Americans to put off making decisions about money, says a study from retirement planning company Principal.
“People say they don’t have enough money to save and make financial choices,” says the study. “However, the research finds that what’s largely driving this procrastination isn’t necessarily lack of money; it’s lack of the right, confident mindset.”
Confidence is key
Most Americans (60 percent) say their income is the reason they put off making financial decisions. However, the study reveals that income and debt level do not contribute to our likelihood to make financial decisions. For instance, 23 percent of households with a high-income level postpone making major financial decisions, too.
Only 30 percent of Americans feel confident in the knowledge they have about managing finances. And those who aren’t confident are 64 percent more likely to postpone money decisions, regardless of their income.
People who spend time learning about financial planning are 75 percent more confident in their future finances. And those who are confident in their future finances are 88 percent more likely to rank retirement as a top financial priority.
Knowledge equals confidence, according to the study. If only more Americans had access to financial education…
Financial literacy helps decision making
The problem with financial literacy is, most Americans don’t learn how to manage money at a young age. And those who do? Schools and parents can’t agree on what to teach, and kids end up confused.
Putting off financial decisions costs us money. Financial ignorance cost 41 percent of Americans $500 last year, according to the National Financial Educators Council (NFEC). Another 18 percent say they missed out on $2,500 while the average overall cost was $1,171.
“Americans today have to negotiate a very complex financial and economic landscape, and given recent changes to the tax code and new digital currency options, that complexity is only going to increase,” says CEO of the NFEC Vince Shorb. “Improving people’s ability to make informed financial decisions and increasing access to financial education programs is more important now than ever before.”
More than a month
If it’s more important now than ever before, then financial literacy could take a higher priority in the U.S. As a previous Debt.com report asked: Does financial literacy month teach Americans anything? Since 2004, the U.S. has dedicated a month to spread awareness to teach Americans healthy financial habits, but their outlook on finances never improves.
Thirty-nine percent of Americans say their stress from money has increased since last year, 46 percent say it hasn’t changed. While 47 percent predict their stress levels from money to stay the same next year. And 20 percent say it will increase, says a study from voluntary benefits company Purchasing Power.
“Although the U.S. economy is healthy and the stock market continues to rise, employees are still stressed about their finances,” says Purchasing Power president Scott Rosenberg. “Many struggle to pay their household bills because financially-fragile employees don’t necessarily benefit from these trends.”
But as Debt.com’s chairman Howard Dvorkin has suggested, Financial Literacy Month doesn’t help, because it’s not a full year. He suggests making a full year dedicated to personal debt to teach Americans to understand how their finances work.
“Why not?” Dvorkin asks. “If Congress supported the idea of Financial Literacy Month 15 years ago, even that gridlocked branch of government should be able to get behind Financial Literacy Year.”
If Dvorkin is right, maybe Americans can learn more and make firmer financial decisions.
Originally published at www.debt.com on May 28, 2018.