The 2018 TIAA Institute-GFLEC Personal Finance Index : Executive Summary

The State of Financial Literacy Among U.S. Adults

Executive Summary

The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) is an annual barometer of knowledge and understanding which enable sound financial decision making and effective management of personal finances among U.S. adults. It is unique in its capacity to examine financial literacy across eight areas of personal finance in which individuals routinely function. The 2018 data represents the second wave of the P-Fin Index.

Most Americans lack personal finance knowledge for making appropriate financial decisions in the normal course of life. On average, U.S. adults answered 50% of the P-Fin Index questions correctly. In addition, there is essentially a 50/50 split between those who were able to answer one-half of the index questions correctly and those who were not able to do so.

Comprehending risk is the functional area where financial literacy tends to be lowest. On average, survey participants answered only 35% of these questions correctly. This finding is troubling given that risk and uncertainty are inherent in most financial decision making; comprehending risk and its implications are integral to making appropriate decisions. Financial literacy tends to be highest with concepts related to debt and debt management.

The P-Fin Index correlates with financial actions and outcomes in the expected manner, i.e., individuals with greater personal finance knowledge are more likely to have positive personal finance experiences. Each area of functional knowledge is correlated in the expected direction with the outcomes examined, but none disproportionately so. This indicates comprehensive financial literacy across areas matters for sound financial actions and outcomes—none is more important than the others.