What we don’t know can cost us; and many of us have at least some idea of how much.
Respondents to a survey conducted this month reported that their lack of knowledge regarding personal finances likely cost them an average of $1,230 in 2018, as reported by the National Financial Educators Council, a personal finance company that advocates for financial literacy.
Estimating that loss across all Americans, collectively, would represent about $295 billion lost to financial illiteracy last year.
Of the 1,500 who responded to this year’s survey and were asked to estimate the level of their losses, about 59 percent believed they had lost up to $500, but about 23 percent put the cost of their lack of financial knowledge between $1,000 and $10,000. The results were similar to that of the same survey taken at the start of last year.
And those guesses might underestimate just how much financial illiteracy is costing us in avoidable bank fees, credit card and debt interest, interest rates on loans, investment losses and other costs that can go unnoticed, an NFRC release regarding the survey said.
Offering some help in limiting those losses, the office of State Treasurer Duane Davidson has recently launched a series of online financial literacy lessons, most broken down into five-minute segments, that offer information and online tools for adults and teens. The material is offered in English and Spanish.
The seminars, produced in collaboration with Everfi, a Washington, D.C.-based educational technology firm, use audio, video and illustrations in brief lessons regarding a range of financial subjects, including loans and payments; buying a home; paying for college and planning for retirement. A module on money basics offers information on emergency funds, checking accounts, overdrafts, credit scores and reports, identity protection, insurance and taxes. Some offer brief quizzes to check what’s been learned.
A 90-second video on payday loans, for example, explains how the short-term loans work and the types of fees to expect, but also warns of the additional costs that can mount when payments are missed or another loan is taken out to cover the earlier one.
Online calculators and other interactive tools are offered that help in planning emergency savings, life insurance, college savings, student loan refinancing, mortgage refinancing, paying off debt, retirement financing and budgeting. One calculator can help show whether it’s better to use some extra money, such as an income tax rebate, to pay off debt or put into an investment.
Another resource, for parents who want to encourage financial literacy, is offered by the National Education Association, with lesson plans and materials on financial basics such as spending and saving, checking accounts, credit and smart consumer choices.
And MyMoney.Gov, created by the federal Financial Literacy and Education Commission, offers resources and tools on many of these subjects and others and links to additional help at the Consumer Financial Protection Bureau.
The National Financial Educators Council also polled people in 2017, asking for their estimates of what they’ve lost during their lifetimes to a lack of financial literacy: 1 in 3 people estimated that financial literacy cost them $15,000, while 1 in 4 set the cost at $30,000. The average estimate for lifetime losses ranged from $9,725 to $13,238.
Some time spent brushing up what we know about what we’re spending, buying, borrowing and saving could pay off.