Among the findings:
• Half could not describe what a 401(k) is
• Forty-eight percent could not define interest
• Forty-eight percent did not understand the basics of bankruptcy
• Thirty-four percent were unclear on the principles of inflation
• Fifty-five percent said they were lost when it came to a long-term, stable financial plan.
• Thirteen percent said they had as five-year plan for their finances.
Lack of understanding of basic financial facts also created a lack of positive thinking about the future. Thirty percent said they believed they would never be able to own a home and about the same percentage said they could see no positive change in the future.
GuideVine officials said they were not surprised at the figures. They are consistent with other research over a long period of time. The company deals with many clients who are financially illiterate and don’t know where to begin to reverse their situations.
The lack of understanding is itself a deterrent to taking charge of personal finances, said Raghav Sharma, GuideVine CEO. Because people don’t have a clear view of the problem, they don’t feel compelled to act. They postpone positive action and making long-term decisions.
The survey showed that a majority of the respondents – 66 percent – make a budget, 70 percent of that number have a hard time sticking with it.
The most common mistake apparent in the research (51 percent) is failing to save enough. A paucity of emergency saving accounts also was apparent. Accumulating unnecessary debt is another sore point.
The majority (64 percent) said they are reluctant to seek the help of finance counselors, probably because close to half believe that such advisors are not trustworthy. That may be due to the thousands of representatives in the field and the confusing array of qualifications they have. As people age, they tend to have even less confidence in financial advisors, Sharma said. The younger set are more likely to seek information via family and friends and online.