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INFORMING TODAY’S INVESTORS
Financial Capability in the United StatesReport on the National Financial Capability Study – October 2010
Objective
Annamaria Lusardi (Dartmouth College)
Applied Research & Consulting LLC (ARC)
FINRA Investor Education Foundation
Office of Financial Education, U.S. Treasury Department
Additional input from:– Craig Copeland, Employee Benefit
Research Institute (EBRI)– American Institute of Certified Public
Accountants (AICPA)– Bob Willis, Univ. of Michigan, past PI
of U.S. Health and Retirement Study
Establish a baseline measure of the ability of Americans to manage their money.
Multi-Disciplinary Team:
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
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
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
National Military
Have emergency funds 35% 50%
Do not have emergency funds 60% 49%
Copyright 2007, FINRA Investor Education Foundation
2. Planning Ahead
National Military
Have tried to figure out retirement savings needs
37% 54%
Have not tried to figure out retirement savings needs
58% 43%
Copyright 2007, FINRA Investor Education Foundation
2. Planning Ahead
National Military
Have set aside money for college education
41% 52%
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3. Managing Financial Products
National Military
Used one or more non-bank borrowing method in past 5 years
24% 21%
Copyright 2007, FINRA Investor Education Foundation
3. Managing Financial Products
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%
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4. Financial Knowledge and Decision-Making
Product National Military
Credit Cards 62% 58%
Auto Loans 53% 39%
Copyright 2007, FINRA Investor Education Foundation
4. Financial Knowledge and Decision-Making
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
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Contact InformationJohn M. Gannon
Senior Vice President, FINRA
President, FINRA Investor Education Foundation
1735 K Street, NW
Washington, DC 20006
202-974-2842
www.finrafoundation.org/capability
