Having to file bankruptcy is frequently the result
of not knowing how to handle personal finances.
Every test, quiz, whatever that I see shows the same thing:
“If we extrapolate these results across the 240 million adults residing in the US, we can estimate that – collectively – lack of financial knowledge cost Americans more than $280 billion dollars in 2017,” the report revealed.
And forces some into bankruptcy.
What Don’t We Know
The first question was the purpose of the stock market, which is to bring buyers and sellers together.
Like any other market.
The second ?:
If you had $100 in a savings account and the interest rate was 2 percent per year, after 5 years, how much do you think you would have in the account if you left the money to grow?
A) Exactly $102
B) Less than $102
C) More than $102
D) Not sure
The right answers is C, “more than $102.” Fewer than three in four millennials got that right (73 percent) compared to more than eight in 10 boomers (82 percent). The second most popular answer for millennials was “exactly $102” (10 percent said that versus 3 percent of boomers).
Great. Not only are we ignorant, but it is getting worse as younger folks are more ignorant.
Fewer than half knew the effects of inflation, reducing the purchasing power/value of your dollars.
The reason more boomers correctly answer these questions, as compared to millennials, is likely because they have many more years of saving and investing experience than their millennial counterparts. And frankly, neither age group is particularly adept at financial literacy: One study showed that two-thirds of Americans would not pass a basic financial literacy test.
Now, experience is a great teacher. But most of us would rather learn by avoiding pain than experiencing it.
When Should You Learn Personal Finance?
I think middle school.
What, too late?YIt is never too late to learn, there are still more pitfalls ahead to be avoided.
Most of my clients have compiled a real budget, of their actual income and living expenses.
You should do that. Any of the financial advisor gurus out there advise this.
No one cannot make realistic plans for the future without knowing where you are now.
You may be fine.
You may be able to turn things around, cut expenses, increase your income, and stay out of bankruptcy court.