A new study shows that Americans become considerably less literate about all things financial after age 60, regardless of gender or education level.
The study, which created a test of the money, insurance, investment and credit knowledge Americans need to make basic financial decisions, also found that Americans, regardless of age, are on average financially illiterate.
“If you look at the (test) questions, these are things that you need to know to navigate financial markets,” Michael Finke, an associate professor at Texas Tech University and a co-author of the study, told MarketWatch.
“A lot of people are not able to effectively do that, even when they are at full capacity… It’s amazing what people don’t know.”
Finke and his team found that financial literacy peaks in the late 40s — those aged 45 to 49 answered on average 6.4 of the 10 questions correctly — and that there was a statistically strong and consistent decline in financial literacy among older respondents.
The scores on a test measuring knowledge of investments, insurance, credit and money basics fell about 2 percent each year starting after age 60, falling from about 59 percent correct — hardly a passing grade — for those in their 60s to a dismal 30 percent for those 80 and older, according to Finke.
In other words, confidence in our financial decision-making abilities rises with age but we don't get older and wiser. We become older, less smart and overconfident.
According to The Sacramento Bee, Encore Capital Group has announced the launch of the Consumer Credit Research Institute, a research organization dedicated to better understanding financially distressed consumers' decisions, choices, and activities in order to promote financial literacy, create new knowledge about this growing segment of the population, and develop innovative ways to support household financial recovery.
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