Americans are learning the hard way that they can’t always bank on their own financial knowledge.
On average, U.S. adults lost $1,819 to personal financial errors in 2022, according to the latest National Financial Educators Council (NFEC) report.
That’s a total loss of over $436 billion when scaled up for all 240 million American adults.
“Financial illiteracy is an epidemic in the U.S., and it’s coming at a time when the economic climate is changing rapidly,” says Vince Shorb, CEO of the NFEC. “That means financial education has never been more important than it is today.”
Need a quick crash course? Here are some financial lessons that can have a direct impact on your bottom line.
‘Hold onto your money’: Jeff Bezos says you might want to rethink buying a ‘new automobile, refrigerator, or whatever’ — here are 3 better recession-proof buys
Want to invest your spare change but don’t know where to start? There’s an app for that
Americans are paying nearly 40% more on home insurance compared to 12 years ago — here’s how to spend less on peace of mind
Over 38% of individuals said their lack of financial knowledge cost them more than $500 in 2022, while 23% reported losing over $2,500, and 15% said it set them back by $10,000 or more, according to the NFEC’s latest financial illiteracy survey.
The cost of financial illiteracy has ticked up gradually since 2017 and the pandemic drove those costs to new heights. In 2020, those costs spiked by 27.7%, largely due to pandemic panic. 2022 saw an even larger increase of 31.6% due to record-high inflation and other economic challenges.
“People weren’t prepared for the rapid increase in the cost of food, gas, and other necessities in 2022,” says Shorb. “Many people that were just getting their finances back in order after COVID times are now back to struggling to make ends meet.”
The NFEC identified several common money mistakes that cost Americans billions of dollars every year — here are three of the most common — and costly — errors:
Mistakes made around credit card interest rates and fees cost Americans a whopping $120 billion in 2022.
Credit card companies charge people an annual percentage rate (APR) for borrowing money. Most cards have variable APRs that can go up or down according to specific benchmarks, such as the prime rate.
Carrying balances on your cards can get very costly in the long run, especially right now. The current average credit card APR is 23.39%, according to LendingTree data, but someone with a poor credit score could face an APR closer to 27%. .
If you don’t keep up with your monthly payments, you could end up paying interest on your interest, and your balance can quickly spiral out of control.
WATCH NOW: Video: Suze Orman tells a cautionary tale on what happens when you can’t cover your next financial emergency
If you make your payments on time or pay them in full each month and your credit score is in good shape, you will have lower interest rates available to you when you go to get a car loan or a mortgage — but a crummy credit score can make borrowing of any kind more expensive.
You can usually check your credit score for free and keeping a close eye on it could save you a lot of money and ensure better lending rates in the long run
As for additional fees, credit card companies will charge borrowers for things like late payments and for cash withdrawals.
Simply asking your credit card issuer about repayment options is worth a try.
“For those in debt, opening a credit card bill can be disheartening and feel overwhelming,” says Shorb. “This emotional response to debt can lead people to inaction. For those with larger revolving debt that carries over month to month, it’s important to regularly seek better credit card terms.”
Given the chance, most card issuers are willing to negotiate with you rather than risk you defaulting on the account and not paying anything.
You can also apply for a balance transfer card, which allows you to transfer your current balances to a card with a 0% introductory APR period — giving you up to 21 months to get your finances in order without paying interest before the regular APR kicks in.
READ MORE: Boomer’s remorse: Here are the top 5 ‘big money’ purchases you’ll (probably) regret in retirement and how to offset them
No matter how far the economy tanks, the allure of luxury goods holds strong and aspirational shoppers are still buying pricey Chanel handbags, Dior jackets, and Cartier watches.
In 2021, U.S. luxury spending spiked 47% compared to pre-COVID 2019, and jewelry spending jumped 40%, according to Bank of America data.
While spending slowed slightly in 2022 — due partly to luxury brands hiking their prices – sales still held up well compared with cheaper brands.
The appeal of luxury goods is problematic for those lacking financial knowledge, the NFEC stressed, especially if they’re spending money on items that they “don’t really need and often can’t afford”.
“Many of us have gaps in our financial knowledge that can be costing us money,” says Shorb. “Identify areas that are taking you further away from your financial goals and dedicate time weekly toward addressing those areas.”
Many Americans fall victim to overdraft fees. If you use your debit card to buy something that costs more than you have in your bank account, the transaction may still go through but you’ll be hit with a fee.
According to the Consumer Financial Protection Bureau (CFPB), a typical overdraft fee is around $34. While that may seem minor to some, Shorb points out that “little costs can add up over time”.
In fact, the CFPB estimates that Americans spend $17 billion a year on overdraft and non-sufficient funds (NSF) fees.
Of course, you are expected to pay the fee in addition to the amount you have overdrawn.
Overdraft fees can be easily overlooked but there’s a simple solution for avoiding them: pay attention to your account balance and make sure you don’t spend more than that.
Also, remember that overdraft protection is an account feature you must opt into and pay for. If you have overdraft protection, you could ask your bank to remove your overdraft plan so that you can’t overdraw your account at all — but this means your card could decline if you attempt to make a purchase and you don’t have enough cash in the account.
Better than NFTs: You don’t have to be ultra-rich to own a piece of a Pablo Picasso. Here’s how to enter the fine art market
You could be the landlord of Walmart, Whole Foods and CVS (and collect fat grocery store-anchored income on a quarterly basis)
A looming recession and higher prices are throwing off Americans’ retirement plans — here’s how to protect your nest egg and get back on track
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Is Mr. Wonderful bailing on crypto? Not quite.
It could cost you in other ways.
Many investors overlook real estate simply because it has traditionally been a difficult asset class to invest in. The passage of the JOBS Act gave one company the ability to change that by securitizing single-family rentals and allowing individual investors to easily buy shares of these properties. Jeff Bezos clearly saw promise in this concept because he was quick to invest in the first company to bring it to the market. Arrived launched its fractional real estate investing platform in 2021 af
The market will not be able to overcome rising interest rates and waning corporate profitability, notable short seller Jim Chanos told CNBC on Monday.
"If she has a baby in the stadium, it's officially scripted," Jason Kelce laughed with brother Travis Kelce on their podcast, New Heights with Jason and Travis Kelce
Beleaguered crypto exchange FTX founder Sam Bankman-Fried tried to stop bankruptcy proceedings in the U.S. in November to transfer assets from his crypto exchange to foreign regulators. According to federal prosecutors, Bankman-Fried expected lenient treatment from foreign regulators, eventually allowing him to regain control of FTX. Last month, the Manhattan U.S. attorney’s office charged Mr. Bankman-Fried for stealing billions of dollars from FTX customers and misleading investors. Earlier thi
A Chinese crane manufacturing company distributed 61 million yuan (approximately $9 million) in bonuses to employees from a mountain of cash at its annual party. On Jan. 17, Henan Mine posted videos of its employees walking onto a stage to collect their year-end bonuses from a 6.5-foot-tall mountain of cash and walking off with their arms full of banknotes. An unnamed manager from Henan Mine’s public relations department told Jiemian News that three of the top-performing sales managers from the company were awarded 5 million yuan (approximately $740,000) each.
My interest rate is 3%, and it’s a 30-year fixed-rate mortgage. Looking at current mortgage rates, I’d say you’re better off not refinancing your 30-year fixed mortgage. You’ve snagged a historically low interest rate, which we may not see again for years.
A Bangladeshi teenager was accidentally shipped to Malaysia after a game of hide-and-seek went terribly wrong. The 15-year-old boy, identified only by his first name, Fahim, was reportedly playing the game with his friends at Bangladesh's Chittagong port on Jan. 12 when he decided to hide inside a shipping container. Fahim was unintentionally locked inside the container and loaded onto a commercial ship headed to Malaysia.
The Federal Reserve has been the primary focus of the markets following the 2020 COVID-19 market crash, as generous spending bills have resulted in a massive increase in the overall money supply. To combat this, the Fed has continually increased interest rates to combat rising inflation. While this has been mildly successful, with inflation only rising 6.5% in December, it poses an entirely new challenge. What happened: Since 2020, the U.S. debt has increased by $8 trillion, with several record-
Amazon.com Inc. is expected to reveal its first unprofitable year since 2014 this week — and expectations for the year aren't headed in a positive direction.
FOX Weather correspondent Robert Ray shows the scene in Junction, Texas where tractor-trailers have flipped over due to a winter storm. Ice will continue to threaten the South through Thursday.
General Motors is developing a lithium deposit mine in Nevada to directly source the material, which is critical for making batteries to power electric vehicles.
Kimmel jokes that Dr Phil and Tom Brady should switch places
After an unprecedented hike in natural gas prices, SoCal Gas is promising millions of customers their bills will be cheaper next month. Jasmine Viel reports.
More older women are being diagnosed with late-stage cervical cancer, which experts say is concerning. Here's what you need to know.
New research that used machine learning tools to identify climate trends says that a critical global warming threshold could be closer than we think. The study, published this week in the Proceedings of the National Academy of Science, used artificial neural networks trained on climate model output to predict the time until critical global warming thresholds are reached, and found that the Earth will be 1.5 degrees Celsius warmer in a little over a decade, and 2 degrees Celsius warmer before the
“Nothing makes you feel like a failure like divorce…you failed at marriage."
Microsoft kicked off a slate of technology earnings earlier this week, reporting largely solid numbers that could have quickly been deemed a victory for technology stocks overall if not for CEO Satya Nadella’s cautious guidance. Investors surmised that the technology sector broadly could be in for some hard knocks — even after its impressive January bounce. Recession headlines and the hawkish U.S. Federal Reserve are headwinds for the technology sector and delay its recovery.
Seattle police are searching for two suspects accused of stabbing a man in the University District on Tuesday evening.
‘Financial illiteracy is an epidemic’: Americans lost an average of over $1,800 to financial errors in 2022 — here are 3 money mistakes you might not even realize you're making – Yahoo Finance
