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The FINRA Investor Education Foundation ("IEF") examined the circumstances that impact the ability of Americans to financially weather and recover from economic hardships.
The IEF assessed the population's resilience based on "level of financial literacy, income volatility, debt, emergency savings, owning a retirement account, having health insurance and owning a home."
The IEF found that only 15 percent of Americans are in "a very strong financial position," and that the vast majority (85%) are not financially literate. The IEF concluded that, based on its 2018 data points, four in ten households lack financial resilience and are vulnerable to financial hardships, while less than two in ten households appear to be financially resilient.
Commentary
Perhaps the most surprising finding in this report is that the group of respondents characterized by having, among other things, purchased a home, stable incomes, retirement savings, emergency savings, low debt and health insurance still demonstrated "surprisingly low levels of financial literacy." Despite this low financial literacy, 79% of respondents rated their own financial literacy as high. There are a host of issues raised by financial overconfidence, and this report raises interesting questions as to the optimal way for regulators to educate individuals who believe themselves already to be sufficiently educated.
Primary Sources
- FINRA Press Release: New Research - Four in Ten American Households Had Difficulty Withstanding a Financial Crisis before COVID-19
- FINRA Study: Bouncing Back? The Financial Resilience of Americans
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