Promoting informed financial decisions, saving habits, and education in the workplace is essential to a vibrant and productive workforce. Unfortunately, many people may lack the basic math skills and financial know-how to make decisions. One of my favorite books, which I reread from time to time, is the 1988 book Innumeracy by John Paulos; he coined the book’s title from people being slow in math as compared to illiterate. Math and money are very different, and learning the differences is crucial to building wealth securely.
Even though many adults across generations were functioning with medium levels of financial literacy, too many workers today possess low levels of Personal Financial Proficiency (PFP) and have difficulty applying financial decision-making skills to real-life situations.
Here are a few general questions about everyday financial situations that stumped so many:
- Determining wages and take-home pay,
- Questions about investment types, risk, and return,
- Understanding specific risk economic outcomes risk
- Understanding that 401(k) are not pensions
This is where Americans exhibit the lowest scores, with less than one-third answering correctly.
Lack of financial understanding affects all ages and socioeconomic levels. The result is those who fall into the limited PFP category, even though financially literate, may not manage their financial resources effectively and may feel intimated by retirement, budgeting, tax planning, and Social Security topics.
One way to help everyone become more confident about their personal finances is by building a solid foundation with Personal Financial Proficiency.
Financial literacy dark secret
People with higher levels of financial literacy “fluency bias.” are more likely to build weak foundations to support their financial houses. Sadly, in this case, a little knowledge is dangerous and prevents many from developing a strategy that works and won’t leave you in a pickle as you get to retirement age.
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