We asked consumers about their sense of their own financial literacy and things they had done to improve it. Then, we followed up with a short quiz to find out how much they actually knew. The results, based on 1,200 respondents, were revealing:

Fewer than half of respondents (44%) consider themselves "extremely" or "very" financially literate.
Only 16% indicated ever having participated in a financial literacy program, with a very strong correlation with income levels. Higher-income individuals are significantly more likely to have engaged in financial literacy programs.
Retirement planning and general financial planning are top concerns among consumers. Interestingly, debt management concerns rank lower in priority; our conclusion is that the consumer feels somewhat more educated about issues of debt since the financial crisis stemmed from too much debt.
About two in five (38%) consider financial education programs offered by their primary financial institution to be "extremely" or "very" valuable. The good news is that among millennials (born 1979 to 1999), this increases to 55%. Even more good news: Millennials also indicated they would be more likely to bring new business to a financial institution with which they engaged in financial literacy programming.

Now for the bad news. We asked 15 questions of the survey participants to assess their actual financial literacy. The questions ranged from easy to moderately hard, and addressed topics such as savings, investing, retirement planning and debt management. We graded in the old-fashioned way – no curves or extra credit – and a passing grade was 66% (10 of the 15 questions answered correctly). Here is what we found:

Only 45% of respondents achieved a passing grade of 66% or better.
Debt management questions were most likely to be answered correctly, while scores were poorest in the areas of retirement planning and investing. Even among older Traditionalist consumers (born 1922 to 1945), the percent of retirement questions answered correctly was only 55% (giving further credence to the thought of a big retirement problem in the near future).
Baby boomers were most likely to achieve a passing grade (58%) and millennials were least likely (24%).
Interestingly, perceived level of literacy does not correlate with actual literacy. Only 54% of those who considered themselves "extremely" financially literate achieved a passing score on the quiz.
Finally, financial literacy programs actually can help. Those individuals who had attended four or more literacy programs achieved a passing score 84% of the time, double the 42% pass rate for those not attending any literacy programs.

What can we learn from this? First, it is clear that the lack of financial literacy has serious societal impact. Financial service providers have a vested interest in changing these dynamics, as they especially will benefit from a more financially savvy public. Our research indicates those with higher degrees of financial literacy also have significantly better financial resources – they are more likely to have higher loan and deposit balances than their less financially literate compatriots.

Instant Insights /

On the Financial Literacy Front, We Have Work to Do

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