The 6th Annual P-Fin Index shows that people with low financial literacy are more likely to experience financial difficulties, such as difficulty making ends meet and debt problems.
NEW YORK, April 12, 2022 /PRNewswire/ — More American adults have very low levels of financial literacy than in any year since 2017, the first year of the Personal Finance Index (P-Fin)a joint initiative of the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) of the George Washington University School of Business.
the P-Fin Index is an annual financial literacy barometer based on a 28-question survey. Key findings from this year include:
Adults answered only half of the questions correctly, on average, a troubling number that has remained stable over time.
More adults (23%) than any year in the survey could not answer more than 7 of the 28 questions correctly.
Understanding risk remains the area where functional knowledge tends to be weakest; only about a third of these questions were answered correctly.
The 2022 index went live in January and includes more than 3,500 responses from four racial and ethnic groups and five generations. Asian Americans were oversampled for the first time in 2022 P-Fin Index, as well as black and Hispanic Americans. The new data shows that the financial literacy levels of Asian Americans and whites tend to be equal, with both groups answering about 55% of the questions correctly. Black and Hispanic Americans each answered approximately 35% correctly.
“While this year Personal finance index is concerning, it should be noted that systemic factors and issues are keeping the economic playing field uneven for far too many Americans,” said the TIAA Institute’s senior economist. Paul Yakoboski. “As we strive to improve financial literacy for all, we know that there are also demographic differences that can help or hinder those seeking to achieve financial well-being, such as age, level of overall education and income distribution.”
Examining financial literacy at all ages shows that it tends to be particularly low among young adults. Gen Z and Millennials only answered about 45% of the survey questions correctly.
“The persistently low levels of financial literacy among American adults and, in particular, among the most vulnerable demographic subgroups are troubling,” said Annamaria Lusardi, University Professor at GW and Academic Director of GFLEC. “These results are a call to action! As Financial Literacy Month is underway, I want to invite everyone to join us in our efforts to improve financial literacy and financial well-being for all. .”
the P-Fin Index emphasizes the importance of financial literacy for financial well-being, showing that people with a very low level (compared to those with a very high level) are:
6 times more likely to have difficulty making ends meet.
3 times more likely to be forced into debt.
3 times more likely to be unable to cope with a $2,000 financial shock.
4 times more likely to spend more than 10 hours a week on personal finance issues.
Financial literacy is important even controlling for other factors, such as income. In sum, while not a panacea, increased financial literacy can lead to better financial practices that benefit even those with modest or limited resources.
The full report is available here.
About the TIAA Institute
The TIAA Institute helps advance the way individuals and institutions plan for their financial security and organizational effectiveness. The institute conducts extensive research, provides access to a network of thought leaders, and enables those it serves to anticipate trends, plan future strategies, and maximize the chances of success. For more information about the TIAA Institute, visit www.tiaainstitute.org.
TIAA is a leading provider of secure retirement and results-driven investment solutions for millions of people and thousands of institutions. It is the premier not-for-profit provider of the retirement market, paid more than $3.6 billion to retired customers in 2020 and $1.4 trillion assets under management (as of 12/31/2021).
The Global Financial Literacy Center of Excellence (GFLEC) is dedicated to advancing research and solutions that open the door to universal financial literacy. By working towards this mission, GFLEC has positioned itself as the world’s leading incubator for financial literacy research, policy and solutions.
GFLEC launched in 2011 in George Washington University School of Business in washington d.c. Since then, he has developed groundbreaking tools to measure financial literacy, developed and advised on educational programs, and crafted policy guidelines aimed at advancing financial literacy in the world. United States and around the world. For more information about GFLEC, visit www.gflec.org.
 From December 31, 2020. Based on data from PLANSPONSOR’s 403(b) Market Research, published in August 2021.
 From December 31, 2021 the assets under management of the subsidiaries of Nuveen Investments and the investment management teams of TIAA are $1.375 billion.
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SOURCE TIAA Institute