A recent survey about America’s financial literacy shows that people who don’t know the difference between a stock and a bond realize that they need to save money. The problem is many people are not bothering to do it.
TIAA-CREF, which is promoting the start of National Retirement Savings Week, found that more than one in three Americans (39%) are not saving anything toward retirement. Of course, that’s nuts but a few potential explanations exist for this phenomena, which is truly frightening. The most obvious one is that people’s finances are stretched to the limit in meeting their current needs that the last thing they think they can afford to do is save for a rainy day. Many Americans have already raided their retirement nest eggs that they have built over years — sometimes decades — to keep themselves afloat financially. Retirement for many people is a dream deferred, and in some cases abandoned.
Ignorance also is at work here. For many Americans, finance is a foreign language. There are many people who don’t bother balancing their checkbooks and let their brokerage statements pile up on their kitchen table unopened. TIAA-CREF’s data illustrates this point, finding that more that half of Americans admit they don’t know much about finance even though more than three-quarters (78%) rely on themselves to make household financial decisions. A shocking 85% said they spent money that should have gone toward retirement savings on something else.
Financial ignorance plus opportunity will spell disaster in the coming years as people try to regain the ground that they have lost in recent years. We are about to enter a new golden era of Ponzi schemes unless the American people start taking financial literacy seriously.