New Survey: Americans Fail Money Management
Life + Money

New Survey: Americans Fail Money Management


It’s not just Congress struggling to get debt and spending under control. A series of new reports finds that a majority of Americans haven’t gotten their own financial houses in order. 

Americans seem to have reverted to their pre-financial crisis behavior. They are spending more, saving less, carrying credit card debt, and in general, worried about a lack of retirement and “rainy day” savings, according to the National Foundation for Credit Counseling’s 2011 Consumer Financial Literacy Survey.

The NFCC’s survey of 1,010 adults 18 years old and up found that: more than one in five U.S. adults do not have a good idea of how much they spend on housing, food, and entertainment, a proportion not seen since 2007. On spending, almost three in five adults say they are spending the same or more compared to one year ago. More than one in three adults say they are now saving less than last year, and nearly three in four expressed concerns about their finances, primarily about insufficient savings for retirement.

A separate survey from the Employee Benefit Research Institute on Retirement Confidence found that while 59 percent of all workers say they are currently saving for retirement, more than half say they have less than $25,000 in savings and investments, excluding the value of their primary residence and any defined pension plans. Forty-two percent say they determined their retirement savings needs by guessing, further exacerbating the call of some experts for educational tools to help Americans understand their future retirement needs.

Some experts say financial literacy programs can help workers make decisions about their financial futures now that many companies have eliminated  traditional pension plans and underfunded state and local pensions have been cutting back on benefits. “They are very much flying solo on retirement and they’re going to have to figure out how to take advantage of plans available to them very early on,” said Ted Beck, president and CEO of the National Endowment for Financial Education. “One of the absolute keys here is that time is your friend.” 

In April testimony to Congress, Comptroller General Gene L. Dodaro lamented the limited number of proven financial literacy products to motivate and coach Americans into responsible financial decisions.  “People have decisions that have to be made and the decisions are getting more complicated,” Dodaro told The Fiscal Times, “They look for help just like they would at making other decisions affecting their lives.”

Although the federal government currently funds 50 different programs and initiatives spread across more than 20 different agencies, the General Accounting Office has found little evidence that these programs are effective. Dodaro said fragmentation among agencies administering the programs has caused inefficiency and redundancy. GAO was mandated by the Dodd-Frank Financial Reform Act to look at the programs and eliminate overlap and duplication, which Dodaro says will be finished by its next annual report, coming in the spring of 2012.

Beck refers to what he calls reverse sticker shock, when workers save a few hundred thousand dollars for retirement, but don’t know how to make the money last over 15 to 20 years.

“Suddenly you see this big chunk of money, probably more money than you ever thought you’d have accumulated and it seems comforting,” Beck said. “People get a little lulled about what looks like a large amount of money.”

Future retirees are also dealing with the fact that people are living longer than ever before, and inflation can be unpredictable.  “The information needs to be continuous to people throughout their economic lives,” adds Beck.

Related Links:
Financial literacy teachable moments come at all ages (East Texas Review)
Volunteers to teach financial literacy (The Sun Times)
Students to be recognized for completing financial literacy program (Globe Gazette)