In-Depth: Rep. Sean Casten (D-IL) introduced this resolution to support elderly Americans’ protection through financial literacy. This resolution has one cosponsor, Rep. John Rose (R-TN).
There is also legislation to address financial crimes against seniors in the current Congress. Rep. Josh Gottheimer’s (D-NJ) Senior Security Act of 2019 would create a Senior Investor Taskforce at the Securities and Exchange Commission (SEC) to examine and identify challenges facing senior investors.
Of Note: A 2015 report found that older Americans lose approximately $36.5 billion a year to financial scams and abuse; and those numbers are increasing as technology makes it easier for scammers to target older Americans. In 2016, a survey by the Investor Protection Trust found that nearly one in five seniors — approximately seven million Americans — have reported being victims of exploitation. In 2018, U.S. banks reported a record 24,454 cases of suspected elder financial abuse to the Treasury Department — more than double the number of suspected cases five years earlier.
Financial advisers agree that Americans’ lack of financial literacy is a problem. In a survey of advisers by InvestmentNews, 78% of respondents strongly agreed that financial literacy is a concern in the U.S. Although the U.S. is the world’s largest economy, the Standard & Poor’s Global Financial Literacy Survey ranks it at 14th globally (tied with Switzerland) when measuring the proportion of adults in the country who are financially literate. For perspective: at 57%, the financial literacy level in the U.S. is only slightly higher than that of Botswana, a country with an economy 1,127% smaller than America’s.
In a 2015 study, Annamaria Lusardi of George Washington University and Olivia Mitchell of the University of Pennsylvania found that only 30% of Americans were able to answer three simple questions about inflation, interest compounding, and risk diversification. In light of the complex financial decisions Americans face, the researchers called the success rate “discouragingly low.”
Additionally, there’s evidence of a downward trend in financial literacy. In a 2015 report, FINRA’s National Financial Capability Study (NFCS) found that the percentage of respondents who were able to answer at least four of five financial literacy questions had decreased, from 42% in 2009 to 39% in 2012 and finally, to 37% in 2015. Alarmingly, within the same time frame, Americans’ perceptions of their own financial knowledge became more positive: so, while Americans demonstrably became less financially knowledgeable, they perceived themselves as more financially savvy.
Across age groups, the 2016 Survey of Consumer Finances (SCF) found that average financial literacy didn’t improve significantly with age. While young Americans (ages 20-35) gained some financial literacy with age (ages 36-50), their financial literacy plateaued in middle age (ages 51-65) and then decreased slightly in seniority (ages 66+). Similarly, when the American Society on Aging sponsored a study to evaluate the financial knowledge of Americans over the age of 50, only one-third of respondents could answer all three questions correctly in a survey of three simple questions assessing the knowledge of concepts such as inflation, risk diversification, and interest rates.
Summary by Lorelei Yang(Photo Credit: iStockphoto.com / richard johnson)