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FINRA Study: Financial Optimism Grows, Financial Knowledge Lags

By    |   Wednesday, 05 June 2013 07:53 AM

People are feeling better about their finances and making better financial decisions, according to a study from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation. But even with noted improvement, the results aren't glowing.

Optimism about personal finances has increased from the 2009 National Financial Capability Study. Specifically, 24 percent of the respondents in the 2012 survey said they were satisfied with their personal finances, up from 16 percent in 2009.

And Americans' feelings about money were not the only area of improvement. The level of household debt has decreased since 2009, more people are finding it easier to cover their monthly expenditures, and by 2012 there was a 5 percent increase in participants who claimed to have enough savings to cover three months of expenses, USA Today reported.

Editor’s Note:
Put the World’s Top Financial Minds to Work for You


"We still need to see better financial behavior," Gerri Walsh, president of the foundation, told USA Today.

The savings rate provides some insight. We are fresh out of a storm where the nation was ravaged by soaring unemployment and widespread foreclosures. Yet even with the 5 percent increase, that only brings the level of "rainy day" savings holders to 40 percent.

"Too many Americans are unable to withstand a financial shock," Walsh said.

And some of the progress Americans are making appears to be the result of significant trade-offs.

The number of people who are planning for their children's college education increased by 3 percent. But the data also show a 3 percent drop in number of people with retirement accounts and a 5 percent decline in those with life insurance, Forbes reported.

"Thus it appears that while the recent economic crisis may have helped to motivate Americans positively in terms of short-range planning, long-range planning seems to have been negatively impacted, perhaps because financial resources are being diverted from long-term goals to more immediate needs," the study concludes.

Americans are also still readily engaging in costly financial activities that reflect poor financial management skills, such as using products with high fees like payday lending services and check cashing centers.

Of the survey respondents who gave themselves a 7 out 7 for financial handling, 31 percent reported a high-cost credit card decision, such as making a minimum payment or paying a late fee.

Financial decisions are largely a reflection of financial knowledge, which is an area where Americans appear to be giving themselves far too much credit.

In fact, 73 percent of the respondents gave themselves high ratings for financial knowledge. Yet, the FINRA study included a five-question quiz and only 14 percent could answer all the questions correctly.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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People are feeling better about their finances and making better financial decisions, according to a study from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation. But even with noted improvement, the results aren't glowing.
FINRA,financial,savings,knowledge
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2013-53-05
Wednesday, 05 June 2013 07:53 AM
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