How Much Financial Knowledge Do People Acquire as They Age? Not Much.

Americans’ knowledge of personal finance is low even among people who have already made many important and fundamental financial decisions, says WSJ Wealth Expert Annamaria Lusardi of George Washington University.

People often argue that financial knowledge can be acquired with experience. But if the evidence from a new survey index is any indication, that way of learning may, in fact, be very slow or not work well at all. The TIAA Institute-GFLEC Personal Finance Index, or P-Fin Index for short, provides a snapshot of Americans’ understanding of basic financial concepts. And the results don’t look too promising.

U.S. adults surveyed only answered about half the questions in the index correctly. Just 16% demonstrated a relatively high level of personal-finance understanding; they answered more than three-quarters of the questions correctly. But what was surprising is that Americans’ knowledge of personal finance is low even among people who have already made many important and fundamental financial decisions. This includes older Americans who own investment assets.

Specifically, by age 45 only 10% of respondents could answer more than three quarters of the survey questions correctly. More unsurprisingly, younger adults fared the worst. Just 30% of people aged 18 to 30 were able to correctly answer only a quarter—or fewer—of the questions in the P-Fin Index. This is worrisome as young people today have to deal with important and consequential decisions, from whether to invest in education and how to finance that education, to saving and investing in retirement accounts that are much more dependent today than in the past on an individual’s savvy. It is also worrisome because, if we can infer how learning progresses with age by looking at the experience of the older survey cohorts, we see from the index that learning, overall, is slow.