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Financial Literacy - US - May 2016

The level of financial literacy is low in the US and consumers are paying the price. The ramifications of this to consumers are obvious, and fortunately many consumers realize that they don’t know enough and are interested in learning more. To help consumers improve their understanding of concepts such as interest, budgeting, credit, and investment basics, financial institutions are working to develop literacy programs, either on their own or in partnership with private organizations, the US government, or schools. These programs not only serve the consumer but the industry as well, as consumers who successfully manage their money tend to have more financial products and are therefore more profitable customers.

This report examines the following areas:

  • Literacy is not being taught
  • Few consumers are confident in their knowledge

This Report includes information on:

  • How consumers see their own knowledge of financial concepts
  • The major financial challenges consumers feel are holding them back
  • The opportunities that exist for financial institutions to grow a customer base by helping improve consumers’ knowledge of personal finance.

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Literacy is not being taught
            • Figure 1: Attitudes toward personal finance, by household income, March 2016
          • Few consumers are confident in their knowledge
            • Figure 2: Self-described grade on financial knowledge, by gender, March 2016
          • The opportunities
            • Reach out to college students
              • Figure 3: Attitudes toward financial institutions, December 2014
            • Educating consumers may lead to more profits
              • Figure 4: Interest in seminars to learn about financial topics, by age and gender, March 2016
            • What it means
            • The Market – What You Need to Know

              • Increase in Hispanic population
                • Number of families below poverty level is increasing
                • Market Factors

                  • Increase in Hispanic population
                    • Figure 5: Population by Hispanic origin, 2010-20
                  • Number of families below poverty level is increasing
                    • Figure 6: Percentage of families with incomes below the poverty rate
                • Key Players – What You Need to Know

                  • FINRA
                    • Banks find that literacy is profitable
                      • Bank of America partnership with Khan Academy
                        • Capital One and Consumer Action
                          • Banks partner with schools
                            • States are lagging in their literacy efforts
                            • What’s Working?

                              • FINRA is working hard to increase financial literacy
                                • Banks find that literacy is profitable
                                  • Bank of America and Khan Academy
                                    • Capital One and Consumer Action
                                      • Banks partner with schools
                                      • What’s Struggling?

                                        • Encouraging new customers requires literacy effort
                                          • High school students are not getting a financial education
                                            • College students are not in much better shape
                                              • Figure 7: Financial concerns after graduation, December 2014
                                            • Online resources are available – but are they used?
                                            • What’s Next?

                                              • Native advertising
                                              • The Consumer – What You Need to Know

                                                • Millennials are biggest users of alternative products
                                                  • Large banks hold half of primary accounts
                                                    • Most consumers are not planning for the future
                                                      • An increased awareness of personal financial responsibility
                                                        • Websites are preferable to mobile apps
                                                        • Ownership of Financial Products

                                                          • Majority of consumers have a checking and savings account
                                                            • Figure 8: Ownership of financial products, March 2016
                                                          • Millennials are biggest users of alternative products
                                                            • Figure 9: Ownership of financial products, by generation, March 2016
                                                          • Hispanics more likely to prefer alternative products
                                                            • Figure 10: Ownership of financial products, by Hispanic origin, March 2016
                                                        • Location of Primary Account

                                                          • Large banks hold half of primary accounts
                                                            • Figure 11: Location of primary account, March 2016
                                                          • Millennials most likely to use online banks
                                                            • Figure 12: Location of primary account, by generation, March 2016
                                                          • Hispanics prefer large banks
                                                            • Figure 13: Location of primary account, by race and Hispanic origin, March 2016
                                                        • Financial Habits

                                                          • Money management
                                                            • Young people have day-to-day financial struggles
                                                              • Figure 14: Financial habits, by generation, March 2016
                                                            • Blacks are struggling with money management, too
                                                              • Figure 15: Financial habits, by race, March 2016
                                                            • Financial planning and execution
                                                              • Most are not planning for the future
                                                                • Figure 16: Financial habits, by generation, March 2016
                                                              • Parents plan more than nonparents do
                                                                • Figure 17: Financial habits, by parental status, March 2016
                                                              • Blacks are not saving money
                                                                • Figure 18: Financial habits, by race, March 2016
                                                              • Budgets are a part of most consumers’ lives
                                                                • Credit Management
                                                                  • Singles least likely to check credit score
                                                                    • Figure 19: Financial habits, by marital status, March 2016
                                                                  • Credit card balances are the difference between good grades and bad
                                                                    • Figure 20: Financial habits, by self-described grade on financial knowledge, March 2016
                                                                • Sources of Information About Personal Finance

                                                                  • Family is the most popular source of financial information
                                                                    • Figure 21: Sources of financial information, March 2016
                                                                  • Family most important to young consumers
                                                                    • Figure 22: Sources of financial information, by generation, March 2016
                                                                  • Respondents often use a variety of sources
                                                                  • Self-Described Grade on Financial Knowledge

                                                                    • Men give themselves higher grades
                                                                      • Figure 23: Self-described grade on financial knowledge, by gender, March 2016
                                                                    • Blacks are not confident
                                                                      • Figure 24: Self-described grade on financial knowledge, by race, March 2016
                                                                    • Confidence increases with household income
                                                                      • Figure 25: Self-described grade on financial knowledge, by household income, March 2016
                                                                    • The effect of income on confidence
                                                                      • Young urban parents believe they are financially literate
                                                                        • Figure 26: Self-described grade on knowledge of personal finance – CHAID – Tree output, March 2016
                                                                        • Figure 27: Self-described grade on knowledge of personal finance – CHAID – Table output, March 2016
                                                                      • CHAID analysis methodology
                                                                      • Interest in Financial Education

                                                                        • Online resources are preferred
                                                                          • Figure 28: Interest in financial education, March 2016
                                                                        • Reaching Millennials
                                                                          • Figure 29: Interest in financial education, Millennials, March 2016
                                                                        • Seminars may reach more Hispanics
                                                                          • Figure 30: Interest in financial education, by Hispanic origin, March 2016
                                                                      • Attitudes toward Personal Finance

                                                                        • An increased awareness of personal financial responsibility
                                                                          • Figure 31: Attitudes toward financial services, March 2016
                                                                        • Millennials need – and want – help
                                                                          • Figure 32: Attitudes toward personal finance, Millennials, March 2016
                                                                        • Disconnect between risk and reward
                                                                          • Figure 33: Attitudes toward personal finance, March 2016
                                                                        • Hispanics need credit management help
                                                                          • Figure 34: Attitudes toward personal finance, by Hispanic origin, March 2016
                                                                        • Consumers who give themselves As are more optimistic
                                                                          • Figure 35: Attitudes toward personal finance, by self-described grade on financial knowledge, March 2016
                                                                      • Preferred Methods of Communication

                                                                        • Websites are preferable to mobile apps
                                                                          • Figure 36: Preferred methods of communication, March 2016
                                                                        • In-person communication is preferable to phones
                                                                          • Figure 37: Preferred methods of communication, by generation, March 2016
                                                                        • Mobile communication is important to Hispanics
                                                                          • Figure 38: Preferred methods of communication, by Hispanic origin, March 2016
                                                                      • Major Financial Challenges

                                                                        • Men want help investing
                                                                          • Figure 39: Attitudes toward traditional financial services, by gender, March 2016
                                                                        • Credit scores are an issue
                                                                          • Figure 40: Attitudes toward traditional financial services, by generation, parental status, March 2016
                                                                        • Hispanics have challenges and are looking for help
                                                                          • Figure 41: Attitudes toward traditional financial services, by Hispanic origin, March 2016
                                                                        • Major financial concerns
                                                                        • Satisfaction With Financial Services Companies

                                                                          • Men are satisfied, but open to alternatives
                                                                            • Figure 42: Attitudes toward traditional financial services, by gender, March 2016
                                                                          • Parents may be looking for more
                                                                            • Figure 43: Attitudes toward traditional financial services, by parental status, March 2016
                                                                        • Trust in Financial Services Companies

                                                                          • Trust in banks is greater among young consumers
                                                                            • Figure 44: Attitudes toward traditional financial services, by generation, March 2016
                                                                          • Blacks are much less likely than Whites to trust banks
                                                                            • Figure 45: Attitudes toward traditional financial services, by race, March 2016
                                                                        • Appendix – Data Sources and Abbreviations

                                                                          • Data sources
                                                                            • Sales data
                                                                              • Consumer survey data
                                                                                • Consumer qualitative research
                                                                                  • Direct marketing creative
                                                                                    • Terms
                                                                                    • Appendix – Consumer

                                                                                        • Figure 46: Attitudes and opinions about personal finance, by gender, October 2014-December 2015
                                                                                        • Figure 47: Attitudes and opinions about personal finance, by race and Hispanic origin, October 2014-December 2015
                                                                                        • Figure 48: Attitudes and opinions about personal finance, by age, October 2014-December 2015
                                                                                        • Figure 49: Attitudes and opinions about personal finance, by household income, October 2014-December 2015

                                                                                    Companies Covered

                                                                                    To learn more about the companies covered in this report please contact us.

                                                                                    Financial Literacy - US - May 2016

                                                                                    £3,199.84 (Excl.Tax)