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Financial Literacy - US - May 2016

Published By :

Mintel

Published Date : May 2016

Category :

Banking

No. of Pages : N/A

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.

Table of Content

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

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