In its newly released annual report, the Consumer Financial Protection Bureau lays out a pretty solid case for doubling down on financial education.
One in four adults in the U.S. fails to pay all their monthly bills on time and 44% cannot cover an emergency expense of $400 without borrowing or selling something, the report states. Most people compare prices when shopping for a car but about half do not compare loan prices or terms to buy the car. Many also do not comparison shop before obtaining common financial products like a credit card, the report states.
Student loan borrowers seem to walk blindly into years of crushing debt payments. According to the FINRA 2015 National Financial Capability Study, which is sourced in the CFPB annual report, many student loan borrowers do not understand their loan terms. A majority do not estimate monthly payments before obtaining a student loan. Most say that if given a second chance they would take a different course of action.
More than half of U.S. adults surveyed in the FINRA study had not tried to figure out how much they need to save for retirement. The FINRA study also found that many misuse credit in ways that increase the cost of that credit.
An OECD assessment of the financial literacy of 15-year-olds in countries around the world, also sourced in the CFPB annual report, found that students in the U.S. ranked between seventh and ninth in financial literacy among 15 participating developed economies. In the U.S., 21.6%—about one in five—do not reach the baseline level of proficiency in financial literacy.