Over the past several decades, the financial landscape in the United States has changed significantly on several fronts. Individuals must take greater charge of their financial well-being once they retire, and they must also forecast future financial needs, navigate increasingly complex financial markets and manage risk, both during and after their working years. At the same time, financial products and options for borrowing have become more numerous and more complicated, requiring individuals to make choices on an array of options.
Against this backdrop, the consequences of not having the necessary skills to make sound financial decisions become ever more severe. This is particularly true in times of economic instability, when resources may be more limited and negative financial events, such as the loss of a job or a sharp decline in income, are more frequent. Not only has managing day-to-day finances become more difficult for many Americans, but there are also greater risks in getting it wrong.
In consultation with the U.S. Department of the Treasury and the President's Advisory Council on Financial Literacy, the FINRA Investor Education Foundation commissioned a national study of the financial capability of American adults. The overarching research objectives were to benchmark key indicators of financial capability and evaluate how these indicators vary with underlying demographic, behavioral, attitudinal and financial literacy characteristics.
The National Financial Capability Study consists of three linked surveys:
The survey instruments were designed by a multi-disciplinary team that included Professor Annamaria Lusardi of Dartmouth College, Applied Research & Consulting LLC (ARC), the FINRA Investor Education Foundation and the Office of Financial Education of the U.S. Treasury Department. Additional input was provided by Craig Copeland of the Employee Benefit Research Institute (EBRI), the American Institute of Certified Public Accountants (AICPA) and Professor Robert Willis of the University of Michigan, among others.
The Financial Capability Study highlights how many Americans are disadvantaged by their lack of financial capability, and offers a wealth of previously unavailable information on Americans' behavior relating to how they manage their resources and how they make financial decisions (including the factors they consider and the skill sets they use). This robust set of multi-dimensional measurements allows policymakers and researchers to look at individual financial behavior from various angles, at a level of detail that has never been possible before.
The data were collected through an online survey of 28,146 respondents (approximately 500 per state, plus D.C.), over a five-month period, June through October 2009. Within each state, data were weighted to match 2008 American Community Survey (ACS) distributions on age category by gender, ethnicity and education. Additional information on the ACS is available at www.census.gov/acs. All data in the surveys are self-reported by the respondents themselves.