The lack of financial understanding by consumers has been signaled as one of the main reasons behind savings and investing problems faced by many Americans. To that point, a variety of financial research and reports have made it clear that we, as a country, need to focus on financial literacy.
The TIAA Institute-GFLEC Personal Finance Index, or P-Fin Index, shows that only about half of Americans grasp the concepts behind managing debt, saving for retirement or insuring against major risks. This is the knowledge needed for savvy financial decision-making.
Too many people just don't have it, and that does not bode well for families, their communities or the country.
The index gauges overall personal finance knowledge and provides a nuanced analysis of eight areas where individuals routinely make financial decisions.
The latest findings are sobering for two reasons. First, financial knowledge is especially low where it is most needed: in the area of risk and risk management. Second, financial literacy is not improving over time.