The State of our Financial Disunion

Ever wondered how are we doing as a society with saving money and paying off debts?

FINRA National Financial Capability StudyWell, thanks to the good people at the FINRA Investor Education Foundation (FINRA stands for Financial INdustry Regulatory Authority), we have the National Financial Capability Study to tell us all about our spending, saving and debt habits. Plus, I love that they’ve made the results of their studies (the most recent two are from 2009 and 2012) available online and have broken them down by state.

Want to know how you and your state are doing in comparison with the rest of us? Check out www.usfinancialcapability.org.

Here are a few of the highlights, or, more appropriately, lowlights from 2012:

  • 19% of us are spending more than we earn. Oh, but wait, that’s down an entire percentage point from the 2009 finding of 20%. Wahoo!
    Ouch! That’s still essentially one in five individuals that we encounter each day (at the store, in class, at work, during our commute, or even online). So if we cross paths with 150 people today, 28 to 30 of them are going into debt as a matter of course.
  • Savings is a CommitmentAdditionally, only 41% of us are spending LESS than we earn (a.k.a. saving regularly). Another 36% are living paycheck-to-paycheck. If I were to guess, I’d expect a large percentage of that 41% living on less than what they earn to only be saving a few extra bucks a month (probably less than $100). Still, a few bucks extra a month is better than nothing (or less than nothing)!
  • Still less than half of us are paying off our credit cards in full regularly. Although we went from 41% to 49% between 2009 and 2012, that should still be a wake up call to our entire country. More than half of us are regularly paying extra money (interest) to pay for stuff, from hamburgers and fries to TVs and vacations.
  • Many Americans have overdue medical bills, particularly the young.26% of us have overdue medical bills. The obvious reason for this would be the aging baby boomers, right? Wrong!  Only 17% of those 55+ have such bills, while 30% of those 35-54 have an overdue medical bill. Here’s the kicker, though: Those between the ages of 18 and 34 win the prize. 31% of this age group has overdue medical bills (a larger percentage of them are uninsured compared to the general population, plus, many have young dependents who are also incurring medical debts).
  • Finally, to save the best (worst) for last: 30% of Americans had used a non-banks for borrowing money over the previous few years. 30%?!!! That’s essentially 50 people we come across today (if we cross paths with 150 all together) who have used a payday loan, title loan, tax refund anticipation (advance) loan, pawn loan or rent-to-own service in the past 5 years.
    Double ouch! There little surprise here, though that the older we are, the less likely we are to have used such a service (just 17% for those 55+ while 43% for those between 18 and 34). After all, I was briefly among the “users” group myself when I was in my 20s. Thank heavens for a willingness to learn from experience (and not repeat the experience)!

It’s time to stop the insanity. We should find these types of figures not just upsetting and worrisome but unacceptable. They should act as an individual and a social call to action. As parents, we should teach (and model for) our children the value of delayed gratification, of saving and of banking responsibly. As citizens, we should insist that our school boards and departments of education include more financial education for our youth, starting even before middle school. Let’s read more books and articles about financial education, attend financial education seminars and conferences, and have discussions with friends and family about important financial topics.

How about trying FINRA’s financial quiz yourself? 5 quick questions and you can compare your results to those in your home state. Check it out at www.usfinancialcapability.org/quiz.php.

Author of Everyday Money for Everyday People, Todd ChristensenTodd Christensen
Everyday Money for Everyday People
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www.DebtReductionServices.org

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