We know you’re wicked smart, but just in case, here are some excellent state and national resources for financial literacy resources and information:
Consumer Financial Protection Bureau financial education resource page
The National Credit Union Administration Financial Literacy & Education Resource Center
Mycreditunion.gov has tips on creating a budget and meeting financial goals
NEWS: April was National Financial Literacy Month
WHAT THIS MEANS TO YOU: You don’t need a special month to focus on financial literacy. With knowledge being power, statistics show that you will immediately improve your finances.
April was National Financial Literacy Month. I don’t know about you, but I celebrated by running up my credit cards, only making minimum payments, overdrawing my bank account and buying a bunch of stuff online. I didn’t add anything to my emergency fund because, well, it doesn’t exist.
You don’t need a special month to get with the program. Statistics show that the more you know about finances, the better financial habits you’ll have and, because of that, the more money you’ll have.
Sounds like a no-brainer, right? And yet, only half of New Hampshire residents are “financially literate” according to the FINRA National Financial Capability Study, which every three years takes measure of national financial literacy, and how it translates to financial capability. In other words, it connects the dots between what people know about finance and economics, and how strong their personal financial situation is.
The study measures financial literacy with a seven-question quiz on topics someone with basic economics and consumer financial knowledge should know the answers to (we’ll get to that later). The same people are then surveyed about their financial capability.
New Hampshire residents had an average 3.5 correct answers on the quiz, higher than the 3.23 national average and 3.37 New England. Don’t get all excited though – that means that, on average, half of the questions were answered incorrectly or with a “don’t know.”
The people behind the study and other groups, including some here in New Hampshire, are working hard to make financial literacy education a priority in schools. Financial education can also come through the workplace, consumer counseling and other means, but the experts agree it starts best in the schools.
Rebecca Patterson, chair of the board of the Council of Economic Education, appearing on CNBC last month, said the CEE found through its research that understanding how money works not only helps consumers with their own finances, but boosts the economy as a whole.
Because of the lack of economics and financial literacy education in schools, “Millions of U.S. consumers are entering adulthood without basic life skills needed to manage debt, invest, save wisely and appropriately weigh economic tradeoffs over their lifetimes,” she said. “This frequent absence of financial capability can have significant consequences. We have seen consumer decisions repeatedly play meaningful roles in economic downturns.”
In 2022, according to the most recent CEE study, 25 states require high schools to offer an economics course, and 21 require that a student takes it in order to graduate; 27 states require that high schools offer a personal finance course, with nine requiring students take it in order to graduate and 13 requiring it to be integrated into another required course. That number, since that study was done, is now up to 15 and includes New Hampshire.
New Hampshire requires economics to be in its kindergarten through grade 12 education standards, with school districts determining the details. It also requires high schools to offer an economics course, and requires students to take one.
Last year, the state became the 15th to require personal finance be part of the kindergarten through grade 12 education standards, with districts figuring out how it will be done, starting with the 2023-24 school year.
The state requires personal finance to be part of high school coursework. It can be integrated into a course, not necessarily be a standalone course. Beginning with next school year, a New Hampshire high school graduate must be able to explain the importance of money management, spending, credit, saving, and investing in a free-market economy as part of their graduation requirement.
When the law passed, state Board of Education Chairman Andrew Cline said, “Personal financial literacy is at last recognized as an essential part of an adequate education. It’s gratifying to see New Hampshire take this important step toward giving students the tools they need to become financially independent adults.”
The NH JumpStart Coalition, the force behind the new law, found in a 2021 study that 94% of New Hampshire schools already offered some form of personal finance education. Maybe that’s why Granite Staters did so well on the most recent NFCS quiz.
The NFCS, which has been conducted every three years since 2009, consistently finds that the people who do better on the quiz also have better outcomes with credit card use, savings, and other spending habits, and are better prepared for both short and long-term spending needs.
State of NH finances
The NFCS asked 500 New Hampshire residents questions about their finances between June and October 2021 (for the full report, as well as stats going back to 2009, click here.)
Here’s what the study found about New Hampshire habits:
- Making ends meet: 10% said they find it very difficult, 32% said somewhat difficult, 55% said not at all difficult. These were almost identical to the national findings of 10%, 33%, 54%.
- Spending vs. saving: 46% said they are spending less than their income, 32% said they spend about equal to their income; 19% said they spend more than their income. These figures, too, are close to the national ones, 43%, 34% and 19%.
- Occasionally overdrew checking account (respondents with checking accounts): 17% (21% nationally)
- Have unpaid medical bills: 25% (22% nationally)
- Number of times a mortgage payment has been late in the past year: 4% once, 4% more than once (8%, 9% nationally)
- Have taken a loan from a retirement account in the past year (for respondents with defined contribution retirement accounts): 11% (14% nationally)
- Have taken a hardship withdrawal from a retirement account in the past year: 8% (14% nationally)
- Have experienced a large unexpected drop in income in the past year: 22% (26% nationally) [This included the bulk of the early part of the COVID-19 epidemic]
- Have an emergency fund: 54% (53% nationally)
- Have tried to figure out retirement savings needs (for non-retired respondents): 39% (39% nationally)
- Have set aside money for children’s college education (of respondents with children): 40% (40% nationally)
- Have a checking account: 95% (91% nationally)
- Have savings, money market or CD account: 82% (72% nationally)
- Over past year always paid credit cards in full: 54% (59% nationally)
- Over the past year made minimum credit card payments only: 34% (35% nationally)
- Over the past year was charged a fee for exceeding the card limit: 8% (11% nationally)
- Over the past year used a credit card for a cash advance: 10% (15% nationally)
- In the past five years have taken out a high-interest auto title loan or payday loan: 7% (12% auto, 15% payday, nationally)
- In the past five years have taken a tax return advance: 8% (11% nationally)
- In the past five years have brought items to a pawn shop: 12% (21% nationally)
Test your financial knowledge
The NFCS quizzes respondents with questions that test basic economic and financial literacy knowledge. Now’s the chance to see how you do. The questions are included below. Don’t feel bad if you don’t do well, it just means you have some homework ahead if you want to strengthen your financial situation.
The answers and the New Hampshire, national and New England results are at the bottom. If you want to take the quiz online, click here.
OK, here we go!
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?
- More than $102
- Exactly $102
- Less than $102
- Don’t know
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?
- More than today
- Exactly the same
- Less than today
- Don’t know
3. If interest rates rise, what will typically happen to bond prices?
- They will rise
- They will fall
- They will stay the same
- There is no relationship between bond prices and the interest rate
- Don’t know
4. Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
- Less than 2 years
- At least 2 years but less than 5 years
- At least 5 years but less than 10 years
- At least 10 years
- Don’t know
5. Which of the following indicates the highest probability of getting a particular disease?
- There is a one-in-twenty chance of getting the disease
- 2% of the population will get the disease
- 25 out of every 1,000 people will get the disease
- Don’t know
6. A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.
- Don’t know
7. Buying a single company’s stock usually provides a safer return than a stock mutual fund.
- Don’t know
Now for the answers, with percentages for New Hampshire, national and New England respondents. Full disclosure, I got 6 out of 7 correct. I had a “don’t know” on question 3.
1. A. More than $102 (correct answer): 75% NH, 69% national, 72% New England; B. Exactly $102: 9%, 9%, 7%; C. Less than $102: 5%, 6%, 6%; D. Don’t know: 10%, 15%, 14%
2. A. More than today: 13% NH, 12% national, 12% New England; B. Exactly the same: 9%, 11%, 10%; C. Less than today (correct answer): 56%, 53%, 55%; D. Don’t know: 20%. 23%, 21%
3. A. They will rise: 17% NH, 20% national, 18% New England; B. They will fall (correct answer): 27%, 25%, 29%; C. They will stay the same, 6%, 6%, 6%; D. There is no relationship between bond prices and the interest rate, 8%, 9%, 9%; Don’t know, 41%, 39%, 38%
4. A. Less than 2 years: 3% NH, 5% national, 4% New England; B. At least 2 years but less than 5 years (correct answer): 31%, 30%, 31%; C. At least 5 years but less than 10 years: 30%, 28%, 27%; D. At least 10 years: 10%, 7%, 9%; E. Don’t know: 25%, 28%, 27%
5. A. There is a one-in-twenty chance of getting the disease (correct answer): 38% NH, 36% national, 36% New England; B. 2% of the population will get the disease: 14%, 13%, 13%; C. 25 out of every 1,000 people will get the disease: 15%, 17%, 18%; D. Don’t know: 32%, 33%, 32%
6. A. True (correct answer): 76% NH, 69% national, 71% New England; B. False: 7%, 9%, 8%; C. Don’t know: 16%, 22%, 21%
7. A. True: 11% NH, 12% national, 10% New England; B. False (correct answer): 46%, 42%, 44%; C. Don’t know: 42%, 45%, 45%
So, now that you understand the link between financial literacy and your finances, you can find ways to immediately have more money in your pocketbook, savings account and maybe even pay a few bills that’ve been hanging over your head. All it takes to gain wealth is to gain knowledge. It’s your money, after all, so take it seriously.