Financial literacy of U.S. households: Knowledge vs. long-term financial planning

Abstract

We examine the relationship between financial knowledge and long-term financial planning behavior. This analysis is important in light of the recent financial crisis and the current level of economic uncertainty. Survey responses from U.S. households are analyzed using analysis of variance, subgroup analysis, and logistic regressions. Results show that surveyed households are financially knowledgeable (mean score is 75.1%), but exhibit poor financial planning skills (mean score is 59.8%). The findings also show that the correlation between knowledge and financial planning is low, albeit positive. To promote financial literacy, we suggest that public policies strive to embolden financial education during early stages of life; preferably during college years. © 2013 Academy of Financial Services. All rights reserved.