Financial Capability in the United States
Report on the National Financial Capability Study – October 2010
INFORMING TODAY’S INVESTORS
Objective
Establish a baseline measure of the ability of
Americans to manage their money.
Multi-Disciplinary Team:
 Annamaria Lusardi (Dartmouth
College)
 Additional input from:
– Craig Copeland, Employee Benefit
Research Institute (EBRI)
 Applied Research & Consulting LLC
(ARC)
– American Institute of Certified Public
Accountants (AICPA)
 FINRA Investor Education
– Bob Willis, Univ. of Michigan, past PI
Foundation
of U.S. Health and Retirement Study
 Office of Financial Education, U.S.
Treasury Department
Copyright 2007, FINRA Investor Education Foundation
Study Methodology
National Financial Capability Study includes three
linked surveys:
1. National Survey: Nationally-projectable telephone
survey of 1,488 American adults
2. State-by-State Survey: Online survey of
approximately 25,000 respondents (roughly 500 per
state + DC)
3. Military Survey: Online survey of 800 military
personnel and spouses
Copyright 2007, FINRA Investor Education Foundation
Four Key Financial Capability Components
1. Making Ends Meet
2. Planning Ahead
3. Managing Financial Products
4. Financial Knowledge and
Decision-Making
Copyright 2007, FINRA Investor Education Foundation
1. Making Ends Meet
Keeping Up With Monthly Expenses
National
Military
Very difficult
18%
5%
Somewhat difficult
43%
31%
Not at all difficult
36%
64%
Copyright 2007, FINRA Investor Education Foundation
1. Making Ends Meet
Spending vs. Saving
National
Military
Spending less than income
42%
54%
Spending about equal to income
35%
31%
Spending more than income
20%
14%
Copyright 2007, FINRA Investor Education Foundation
2. Planning Ahead
Emergency Funds
National
Military
Have emergency funds
35%
50%
Do not have emergency funds
60%
49%
Copyright 2007, FINRA Investor Education Foundation
2. Planning Ahead
Planning for Retirement
National
Have tried to figure out retirement
37%
savings needs
Have not tried to figure out retirement 58%
savings needs
Copyright 2007, FINRA Investor Education Foundation
Military
54%
43%
2. Planning Ahead
Planning for Children’s College Education
Have set aside money for college
education
Copyright 2007, FINRA Investor Education Foundation
National
Military
41%
52%
3. Managing Financial Products
Non-bank Borrowing
Used one or more non-bank
borrowing method in past 5 years
National
Military
24%
21%
Copyright 2007, FINRA Investor Education Foundation
3. Managing Financial Products
Credit Cards
Respondents who…
National
Military
Have at least 4 credit cards
26%
36%
Have $5,000 or more in credit card debt
28%
41%
Have $10,000 or more in credit card debt
16%
27%
Have $20,000 or more in credit card debt
7%
10%
Copyright 2007, FINRA Investor Education Foundation
4. Financial Knowledge and Decision-Making
Percentage Who Don’t Comparison Shop
Product
Credit Cards
National
62%
Military
58%
Auto Loans
53%
39%
Copyright 2007, FINRA Investor Education Foundation
4. Financial Knowledge and Decision-Making
Measuring Financial Literacy
National
Military
Interest rate question
75%
87%
Inflation question
62%
72%
Bond price question
26%
30%
Mortgage question
73%
88%
Risk question
61%
70%
Mean number of correct answers
2.99
3.47
Copyright 2007, FINRA Investor Education Foundation
Summary
The surveys provides evidence that:
 People are not well equipped to make financial decision
 People are not well informed about the terms of their financial
contracts and they do not shop around
 The majority of Americans do not plan ahead for life-cycle
events
Copyright 2007, FINRA Investor Education Foundation
Next Steps
Military Online Survey
 Data will be made available to the public for independent analysis
State-By-State Online Survey
 Preparation of report for public release (December 2010)
 Creation of Web site for state-by-state comparison
 Data will be made available to the public for independent analysis
Contact Information
John M. Gannon
Senior Vice President, FINRA
President, FINRA Investor Education Foundation
1735 K Street, NW
Washington, DC 20006
202-974-2842
john.gannon@finra.org
www.finrafoundation.org/capability
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