Sunday, September 13, 2009

Financial Illiteracy is an epidemic in the United States

Posted by: Srividya Srinivasan

Regardless of being formally educated, people still have a difficult time comprehending finances. The lack of financial literacy has been a major issue in the United States lately; financial illiteracy is rampant in the United States. According to Richard Briesch, an associate professor of marketing at the Cox School of Business at Southern Methodist University, a recent study by Harris Interactive found that 57 percent of households do not have a budget, 32 percent do not have any savings and 26 percent admit to not paying all of their bills on time.

The financial crisis that is currently happening now is a strong example of how important financial literacy and how detrimental financial mistakes are. “ ‘If we are thinking we are going to address the lack of financial literacy by informing people at one seminar, let's not even start that discussion. You don't cure pneumonia with an aspirin,’ said Annamaria Lusardi©, professor of economics at Dartmouth College. Lusardi is editor of Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs.” This issue is not a simple fix and more financial education could help increase everyone’s financial knowledge. The U.S. government has a site devoted to providing financial education, and banks and other financial institutions provide free financial education as well. However, the statistics from studies show that these tactics are not effective when taking into account the current state of the world’s finances.

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