Imagine yourself in a room full of people from various countries. Represented are Norway, Sweden, Israel, Canada, Germany, Australia and many others.
According to The Standard & Poor Rating Services’ Global Financial Literacy Survey
, the United States ranked 14th in the world with a 57-percent financial literacy rate. Not impressed? Neither are we, but we hope to improve on those results
S&P Global FinLit Survey
1. Norway – 71%
2. Denmark – 71%
3. Sweden – 71%
4. Israel – 68%
5. Canada – 68%
6. United Kingdom – 67%
7. Netherlands – 66%
8. Germany – 66%
9. Australia – 64%
10. Finland – 63%
14. United States – 57%
The survey studied more than 150,000 adults in 144 countries on four basic financial concepts. The results demonstrate there is a long way to go, both in America and globally (only 33 percent of those tested globally are financially literate).
How well do you understand…?
Compound interest (saving)
Why is improving financial literacy important?
Similar to the foundation of a house, a firm understanding of basic financial concepts is critical to long-term and sustained success. Cracks in the foundation, or gaps in one’s financial literacy, increase the likelihood of the house collapsing or requiring significant repair down the road.
“Financial knowledge is especially important in times where increasingly complex financial products are easily available to a wide range of the population,” write the survey’s authors Leora Klapper, Annamaria Lusardi and Peter von Oudheusden.
The authors continued, “Financial ignorance carries significant costs. Consumers who fail to understand the concept of interest compounding spend more on transaction fees, run up bigger debts, and incur higher interest rates on loans. They also end up borrowing more and saving less money.”
In short, your financial literacy affects your bottom line.
You can follow up-to-the-minute stock updates on your smart phone, research and read the latest “hot tip” with a simple internet search and utilize today’s technological advancements to evaluate and make investment decisions with a click of a button.
While these are all useful tools and avenues for financial improvement, stacking this wealth of information on top of a poor foundation may do more harm than good. Since 43 percent of Americans lack basic financial literacy skills, more than a third of the population may be making uninformed decisions for their future.
When people are able to make informed financial choices regarding saving, housing, education, budgeting, and their careers, they become more able to realize their full potential.
A Way to Improve Financial Literacy
While we believe self-directed IRAs are a powerful tool for retirement, we also understand the importance of improving financial literacy. Knowledgeable and informed investors are more confident and have the opportunity to be more successful when using these tools.
A self-directed IRA provides control over your retirement investments, while offering an environment positioned to maximize the power of tax-free or tax-deferred compound interest.
Before a self-directed IRA can work for you, it’s important to get back to the basics with a refresher on the four main financial tenants the Global FinLit Survey tested.
Equity University is launching a FREE Financial Literacy mini-series
designed to help Americans improve their understanding of each of the 4 main concepts of financial literacy: Risk & Diversification, Inflation, Compound Interest and Numeracy.
Over the next few weeks you'll receive free training on each topic, along with the opportunity to UNLOCK our educational library
and access hundreds of webinars, case studies, reports, industry expert guest presentations and much more for free.