Financial Literacy is My Cash Cow

Financial Literacy is My Cash Cow

Financial Literacy is My Cash Cow

Hello $wanigans! Welcome back to The Green Swan. Did I catch you off-guard with the title of today’s post? Well, it is true that Financial Literacy is My Cash Cow. While financial literacy is a primary motivator for me to operate this site, it has yet to develop any meaningful cash flow. Maybe eventually financial literacy will become my cash cow, but until then I am very satisfied in it just being my cash cow.

My Cash Cow

How is Financial Literacy My Cash Cow? Let me explain. On July 12, 2016, FINRA (just another one of the countless government agencies in the US) released the findings from their most recent National Financial Capability Study (NFCS). You want the cliff notes? Not good and getting worse.

  • How can this be, you might ask?
  • Having just gone through the Great Recession which left no life untouched, how can folks actually care less today about money than they did then?
  • How is financial literacy and managing personal finances not the most important topic around every dinner table?
  • Isn’t everyone focused on not repeating the same mistakes from the last recession?
  • Hasn’t everyone become acutely aware of the importance of teaching the next generation what was not taught to us, and passing down key personal finance advice?
  • Hasn’t everyone under the moon stumbled across The Green Swan’s new and fascinating website in the five months it has been around, adopted The Green Swan lifestyle and become a devout $wanigan?!

Background on The Study

The study went out to more than 27,000 US adults (were you one of them?) and asked five questions (excluding a bonus question below). It represents one of the largest and most comprehensive financial capability studies in the country. To be considered “financially literate”, you’d need to answer four of the five questions correct.

The goal of the NFSC study was to determine financial literacy around four main criteria: 1) making ends meet, 2) planning ahead, 3) managing financial products, and 4) financial knowledge and decision-making.

Test Yourself

The questions to the NFCS are outlined below. Test yourself and compare your results to the national average. I’ve listed the answers at the end for your reference, but hopefully it is easy enough you don’t need them.

Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have?

  1. More than $102
  2. Exactly $102
  3. Less than $102
  4. Don’t Know

Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?

  1. More
  2. Same
  3. Less
  4. Don’t Know

If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?

  1. Rise
  2. Fall
  3. Stay the Same
  4. No Relationship
  5. Don’t Know

True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.

  1. True
  2. False
  3. Don’t Know

True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.

  1. True
  2. False
  3. Don’t Know

Bonus Question (shown online only)

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?

  1. Less than 2 years
  2. 2 to 4 years
  3. 5 to 9 years
  4. 10 or more years
  5. Don’t Know


Answers in order: 1, 3, 2, 1, 2, 2

My Results

Would you be surprised if I got all six correct? Of course not! And of course I did! That compares to 3.16 for the national average and 3.02 for the state of North Carolina. Ouch America and double ouch North Carolina! I’m loving the exclamation marks in this paragraph!

Financial Literacy is My Cash Cow

How did you do? If you want to take the quiz and compare your results to the state you live in, click here:

Additional Findings

Let’s take a look at a few details and findings. I’ll try my best to maintain a “glass half full” mentality.

The Good

  • 46% have a rainy day fund in 2015 which is up from 35% in 2009 and 40% in 2012. While personally I don’t hold much stock in emergency funds since I am comfortable with my Emergency Fund Alternatives, I can understand this to be an important factor for many American’s personal financial condition. It’s good to see this is trending correctly.

The Bad

  • 78% of folks are able to make ends meet in 2015 (“glass half full”). While 18% spend more than they make, this is better than 20% in 2009 and 19% in 2012. I presume the remaining 4% “don’t know”. It kind of scares me thinking that nearly a fifth of Americans are running their personal finances in the “red”.
  • 52% pay off their credit cards in full each month. While 32% pay the minimum required, that is better than 40% in 2009 and 34% in 2012. Yay! Kind of…paying just the minimum can result in a significant long term drain on personal finances due to the high interest rates. And if people are running in the “red” year after year like the previous bullet mentions, this means that credit card debt will keep going up and up.

The Ugly

No “glass half full” approach on these…

  • 63% of respondents answered 3 or fewer correctly from the five point questionnaire above. That is up from 58% in 2009 and 61% in 2012. Not only is this really high, but it has gotten worse in recent years. I thought the questions were fairly fundamental. I don’t mean to be too demeaning, but this doesn’t give me a whole lot of confidence.
  • 58% do not compare credit card offers. While this is down from 62% in 2009 and 61% in 2012, it is still shockingly high and scary that so many people do not even perform the most basic research when making this significant financial decision.

Financial Literacy is My Cash Cow

So as you can see, the financial literacy of the US is not that strong which is why this site will go on and why financial literacy is my cash cow. While I understand it may appear to be a conflict of interest here, I’m not rooting for America to rate poorly in financial literacy (even though it is my cash cow). It is pretty pathetic how we rate and I think it is important for our nation’s future to get this right. There is a lot of improvement we can make and I am here to do my part.

Areas Ripe for Improvement

Wow, I don’t really know where to begin with this. There definitely is a systemic issue in the US in terms of how we are being educated. I’m not here to point blame, but the solution should come from a combination of better parenting, mandatory personal finance curriculum from first grade through high school, and personal accountability.

To improve financial literacy at this point, I think we need to focus on the low hanging fruit. Perhaps public service announcements and programs to teach folks about debt and its appropriate / inappropriate uses. This would include discussion on credit cards, student debt and payday loans as well as mortgage and car loans. This is a major weakness and, if addressed, could do a lot of good.

And I think it would lead to the next step which would be helping folks make ends meet.

With more appropriate use of debt (or reducing the inappropriate uses of debt) would lower the interest and fees that drain on folks’ cash flow. And secondarily, helping folks understand their cost of living and how to prepare for emergency / rainy days. This is more difficult and abstract for folks, I believe, and would be hard to change the consumerism and materialistic culture in America.

To help fund the public service announcements and educational programs, how about financial institutions pay a fee or restitution? It could be based on the number of customers and size of the institution.

The Cherry on Top

No doubt, there are a number of financial issues that plague Americans. I think the cherry on top is our national debt. I don’t want to make this political by any means; I’m merely trying to drive home the point about how much debt we have, collectively speaking. As of [August 1, 2016 at 11:45 AM EST, our national debt is $19,410,640,000,000] and dang the counter at usdebtclock (dot) org is turning fast! That is almost $20 trillion, folks!

As of 2014, it is estimated there are approximately 134 million households in the US. With $20 trillion in US national debt, that equates to almost $150,000 of national debt for each household. And who do you think will be responsible for paying of this debt eventually…?

I’ll put a pin in it there. Let me know what you think in the comments below. Anything that stood out to you particularly? Any suggestions you have to help improve our nation’s financial literacy? How did you do on the quiz?

Thanks for taking a look!

The Green Swan

Work Harder, Work Smarter, Retire Earlier and Find Your Beach








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  1. Nice post GS – The financial literacy rate in the U.S. is so depressing. I’m doing my best to educate my kids so they don’t become a FINRA statistic!

    I’m sure your readers will all get a 6 out of 6!

    1. I’ll be doing my best as well! Thanks Jon.

      Some of the questions may trip people up, question 3 is tricky.

      Thanks for giving it a read!

  2. I got 6/6 woohoo! You have 7 answers listed though, is that a “double secret bonus” to see who’s paying attention? 🙂

    I find it pretty shocking that more people don;t care about financial literacy. However, even being college educated and working in a field where I prepared budgets, proposals for companies and knew how to do all of that stuff I actively shied away from learning about investing and the like until WAY later in life.

    I still contributed to a 401k and thought that was doing great relative to the rest of my family and peers, but that was it. I wasn’t managing my own budgets or debt well. I did realize what you pointed out and that was that all my reckless credit card spending did was trap me in a hole to be “even more poor.” I had started working on a debt snowball plan to get that down, but everytime I would get one card paid down, instead of rolling that into the next cards, I’d ease up and boom, put myself right back into a bad debt cycle.

    I think education about financial literacy is a great place to start. Mandatory classes in highschool and even younger would be voted for in my book.

    1. Yup, you passed Mr SSC!

      I remember college buddies who were studying finance and were smart folks, but didn’t understand personal finance well. It’s kind of ironic, like seeing a nurse outside smoking. But not uncommon at all.

      Something has to change. And when it does I’m sure any improvement will be gradual at first but we need to get the ball rolling.

      Thanks for stopping by and sharing!

  3. I read the first question three times thinking you may be tricking me

    Reading post like this make me want to thank my parents for teaching basics early on. It didn’t save me from a few mistakes but o know how interest works!

    All we can do is keep spreading the word!

    1. Haha that’s funny Mr AE! I take it you still got the question right?!

      I owe a lot of thanks to my parents too. Thanks for giving it a read.

  4. Thanks for sharing the quiz! I passed – yay! I’m grateful for my parents teaching me to stay out of debt and how to manage monthly cash flow. This alone gave me a great start and, though I did take on auto loans and student loans, I never found myself in credit card debt. But as far as interest rates, financing, investing – all of that I’ve learned along the way on my own.

    I do think we need to teach the basics of finance – on debt, spending less than you earn, responsibility with bill paying, etc., but this will only take you so far. People have to really “want” to take control of their finances and learn some degree of delayed gratification and then some more progress can be made. I’m seeing this with my 16 year old son – we are very frugal and responsible with our money, have never “spoiled” the kids and handed out money willy nilly, but he spends almost every dollar that passes through his hands on computer parts and going out to eat with friends – because it’s what he wants to do at the time. Ugh!

    1. I passed too – but geez, you almost feel the stress from taking a “quiz”! I was just talking with my brother about the lack of financial literacy our other sibling has! He was brought up in the same house with great role models too. I agree with Amanda that unless someone wants to take control of their finances, there is little you can do to help them understand! Great post!

      1. Good for you, Vicki!

        That’s an interesting dynamic with your one sibling. I notice differences among my siblings too, not a ton with financial literacy necessarily but more so in spending habits.

        Thanks for stopping by!

    2. Good for you, Amanda!

      I imagine that being very difficult with your son. I can’t speak from any experience since my kid is only two yet, but I’m sure it’s hard changing their will. As they say, you can lead a house to water but you can’t make them drink.

      Thanks for sharing!

  5. Happy to report I went 6/6, phew! I am actually surprised at some of these statistics, in a good way. Honestly, I thought they would be even lower so it is nice to see some sort of progress.
    This is where I stand on this issue: America is fueled by debt and everybody has debt as it is the norm, excluding mortgage. Many people are short-term minded (This is true all over the world not just America) so thinking about the future is scary for many. Outside the personal finance blogging realm and the very few who care about retiring early I have found that most people are content living day to day and will “figure it out” when the time comes. Scary stuff especially when there is so much information online!

    1. Nice work, Stefan! And I agree with your take on financial literacy. It’s a shame, especially given all the free resources to help folks out!

      Thanks for the comment.

  6. Sadly, none of this is surprising to me. We were pretty financially illiterate and irresponsible until a couple of years ago. Although things are improving, we really could do much better in educating our society about the fundamentals of money. I am focusing my efforts on our kids right now, so they (hopefully) won’t make the same mistakes as us.

  7. Just found your blog and loving it. You and I have differing opinions on a few topics, but definitely come together often, which makes this more enjoyable.

    The national debt is fundamentally different than household debt or business debt. I would highly recommend this podcast episode:

    Also, I think you forgot to hyperlink your emergency fund alternatives (under “additional findings) 🙂

    1. Thanks Eric, I appreciate you stopping by.

      I understand there are differences, but I don’t think it should be ignored either. I’ll give the podcast a listen, appreciate the link.

      Fixed the hyperlink, thanks! Appreciate the comment.

  8. Hey, I got 6/6 too. And the prize is……..knowing that you have the skills, knowledge and financial literacy to set a FIRE goal and achieve it. Great post GS but a bit worrying that the majority of the population are doomed to slog their guts out working until the legal retirement age only to find that they don’t have sufficient funds to ensure a comfortable retirement.

    Yes, why don’t they teach this in schools?

    1. Ding ding ding, you are the winner Martin! No surprise you nailed it.

      No excuses for the lame results, we should do better and hold folks to a higher standard. Shameful. Curious how it compares to other developed countries…

  9. I got 6/6 on the test, but I did it before on another site (BBC I think it was), it’s a good test and there aren’t any trick questions. It’s a shame so many don’t get 6/6 – money should be a separate school subject/topic, and one of the best important ones in school! Australia does have a basic system (sponsored by one of our big banks, of course) but it could go a lot further.


    1. Nice work, Tristan.

      Oh that is interesting and good to hear that one of your big banks stepped up to sponsor the basic education. I bet that is good PR! Thanks for sharing.

  10. I wouldn’t be surprised if financial literacy was a problem in many countries. It would be interesting to see how other countries perform on that test.
    At the same time, I was expecting the average to be between 3 and 4, where most of the easy answers are. If I ask the guy who came to paint my ceiling a few month back, he may not have been 100% on these, but he sure knew how to paint a ceiling in no time and repair my water damage.
    Teaching in school would definitely be the best way to do it and apparently some schools do. In the meantime, I think it kinda falls on the PF community to motivate others to get excited about finances and motivate our kids & friends so they can spread the message too 🙂

    1. We can all help do our part, and I agree it is very important to take an active role in teaching our children. I wish it was part of our core curriculum too. PF can be complicated, but helping teach the basics early and often can make a big difference. Thanks for stopping by!

  11. A nice post. Sadly, the financial literacy problem isn’t all that surprising when you consider the debt and spending statistics in the U.S.

    Your recommendations for remediation sound pretty good – education, personal accountability, etc. are all hallmarks of successful societies. Unfortunately, people have a pretty dismal record of doing the right things when it comes to financial decisions, even when they’re educated and responsible. Behavioral economist Richard Thaler outlines a few ways to improve households’ financial outcomes in his book “Nudge,” and two prevailing themes are “default” and “simplicity.”

    For example, what if bank statements had to report (estimated) real interest rates rather than just nominal rates? This would simplify the inflation/return issue. We’ve already got improved credit card statements that tell us how much interest we’ll pay and how long we’ll be indebted if we only pay the minimums. But what if peoples’ credit card payments were all set to automatically deduct 2x the minimum payment from their bank accounts? That would almost certainly speed up debt repayment because default settings are very powerful in guiding behavior.

    Thanks for the thought-provoking post.

    1. Great thoughts, Libre, thanks for sharing. That’s exactly the type of things we need to start doing more of. I read about half of Nudge, I need to pick it back up and finish it. I think that’s a great solution, small things to slightly mend folks behavior can make big changes. Through the part I read, Thaler gave many examples of such. Thanks!

  12. 6/6 here. I have to admit, I was nervous I would get one wrong. . . 🙂

    JW, you are correct that there are many culprits to blame for the lack of financial literacy here in the US. I think it is largely just a function of today’s culture, in many ways. It isn’t cool or popular to pay attention to your finances and take the necessary action to be successful. It’s much easier to adopt the herd mentality and do what your neighbor or best friend does. That way, everyone succeeds or fails together. When articulated, it’s obviously a pretty terrible approach, but I feel that many people follow a similar path without really considering the consequences.

    1. Well done, Finance Superhero! Yeah I think you are on to something there. It’s the keeping up with the Jones’ mentality. Thanks for stopping by!

  13. Wow, again this gives me a lot to think about. I’m not surprised either on the national average results. I really believe much of the solution lies with better parenting. And no doubt this blog will help others + become your cash cow someday. Have a great weekend. 🙂

  14. Dang, this is some depressing stuff!! I knew Americans suck when it comes to financial literacy, but I had no idea it was THIS bad. Yay for bloggers like you trying to help the problem 🙂

    1. Yeah pretty bad. We can all do our part by improving our own financial literacy as well as passing it on to our children and being role models for others. Thanks for stopping by, Jeff!

  15. It would be really interesting if someone did a study on how America became such a spending-oriented country. China has a double digit savings rate while I think Americans have a single digit savings rate (unbacked sources). I try to save 55% of pretax money into my 401k and saving a little more after-tax money. Long term success is what I’m trying to go for!

  16. It seems most people don’t enjoy talking about personal finance or money in general. It’s like a taboo. I have friends who tell me they don’t want to think about money or track their spending as it doesn’t excite them. Financial literacy is a boring topic for them. They would rather pay someone else to tell them what to do with their money. I am new to the blogging scene, but I have noticed that most people who read and comment on financial blogs are financial bloggers themselves. So it’s really the bloggers helping bloggers and the people who really need help with their finances don’t bother to read any or much of the stuff on these blogs. Am I wrong?

    1. Interesting, thanks for sharing.

      You aren’t wrong, other bloggers are who comment most frequently. But there are plenty of other regular readers who don’t comment. But I don’t think blogs are mainstream so the masses aren’t hearing this message, for sure.

      Thanks for stopping by. I look forward to checking out your blog.

      1. JW,

        You make a good point that many readers who read blogs don’t comment. I know I have learned a lot from reading other people’s blogs but may not have commented much. I am trying to find a balance for my blog in terms of how detailed or technical I want to be with my posts.

        Thanks and yes please check out my blog and let me know what you think.

        MR. ATM

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