Inside the Foundation  
Consumers Give Themselves a 'C' or Worse in Financial Knowledge
Wednesday, April 2, 2014 8:00 AM

A survey released this week by the National Foundation for Credit Counseling finds significant gaps of personal financial knowledge in budgeting, saving, and understanding credit reports and credit scores - all key areas related to successful money management.

“There is a tremendous need for financial education, and National Financial Literacy month is an excellent opportunity to increase awareness, and inspire consumers to make a change,” notes Cornerstone Credit Union Foundation Executive Director Courtney Moran. “Not having the necessary financial knowledge and skills can prevent consumers from ever realizing true financial stability.”

As champions of the financial literacy cause, Moran says credit unions continue to make great strides in deploying financial education into their local schools and communities. And during the month of April, Moran says a number of credit unions are hosting financial education workshops and classes; lunch and learns, and reality fairs. Others are conducting fundraisers – everything from selling breakfast tacos, and holding jeans days, to even a flip-flop day. 

“Our credit unions are engaged and getting really creative in their support of National Financial Literacy Month,” adds Moran.

According to Moran, the following credit unions have informed the Foundation that they are doing some kind of financial activity this month:

  • A+ FCU
  • Amarillo Community FCU
  • Beacon FCU
  • Border FCU
  • DuPont Goodrich CU
  • Education CU
  • El Paso Chapter of CUs
  • Employees CU
  • FivePoint CU
  • Generations FCU
  • Gulf Coast Educators
  • InTouch CU
  • My Community FCU
  • New Mt Zion CU
  • North East Texas CU
  • People's Trust
  • Resource One CU
  • Security Service  FCU
  • Texas Partners FCU
  • Tarrant County CU
  • Texas Trust CU

In its eighth year, NFCC’s survey provides a snapshot of the American consumer's level of knowledge as it relates to financial literacy, as well as behavioral and attitudinal trends associated with personal finance.

According to the survey, 61 percent of U.S. adults, the highest percentage in six years, admit to not having a budget. Financial experts generally agree that a budget is a basic tool of financial management, and without it, a person can more easily lose track of spending. Nonetheless, consumers appear reluctant to utilize this tool, which could explain why about one in three adults (34 percent) indicated their household carries credit card debt from month-to-month, with 15 percent, or more than 35 million people , admitting to rolling over $2,500 or more monthly.

When asked which areas of personal finance are most worrisome, the top concerns were evenly divided between insufficient "rainy day" savings for an emergency (16 percent) and retiring without having enough money set aside (16 percent). However, the proportion of adults who are spending less when compared to the previous year continues to decline, from a high in 2009 of 57 percent, to a low in 2014 of 29 percent. This suggests that, although consumers are uncomfortable with their lack of savings, they may have nonetheless continually increased their year-over-year spending.

Most adults have not reviewed their credit score (60 percent) or their credit report (65 percent) within the past 12 months. Close to one in four adults who did not order their credit report in the past 12 months (23 percent) indicated that they already knew their credit score(s), so they didn't think they needed their credit report(s). Although related, credit reports and credit scores are two very different expressions of a person's credit. Since each plays a critical role in a person's financial future, they both merit regular review. A further reflection of the confusion around credit reports and scores is that more than half of all U.S. adults (54 percent) mistakenly believe that a standard credit report typically contains a person's credit score(s).

Forty-one percent of adults gave themselves a grade of C, D or F on their knowledge of personal finance. Therefore, it is not surprising that, when asked what their money would say to them if money could talk, about one in five (21 percent) thought it would say "I'm smaller than most of my friends." Curiously, about one in five (21 percent) also thought their money would say "I feel loved and nurtured."

The absence of a budget, insufficient savings, spending beyond what can be responsibly repaid, confusion around credit reports and scores, and an admitted lack of knowledge pertaining to personal finance are reds flags that demand attention. The good news is that nearly three in four U.S. adults (73 percent) agree that, considering what they already know about personal finance, they could still benefit from advice and answers to everyday financial questions from a professional. Further, if they were having financial problems related to debt, 27 percent of adults, or more than 63 million people, indicated they would reach out to a professional non-profit credit counseling agency for assistance.