recent questionnaire by the National Financial Educators Council found that in 2022, financial illiteracy cost Americans a median of $1,819 per person. That is the most important number within the study’s six-year history.
The study relies on the common losses reported by 83,000 survey respondents in 50 states. Individuals were asked how much money they thought that they had lost due to lack of information about personal finance.
The rise in losses in 2022 may be attributed to record high inflation and other recent economic challenges, but there are a couple of common mistakes made annually that would cost hundreds of lives. Here’s a have a look at 4.
1. Bank card interest and charges
According to Consumer Financial Protection Bureau (CFPB), probably the most common and dear financial illiteracy mistake made annually is bank card interest and charges, which cost Americans nearly $120 billion annually.
To avoid fees and interest charges, the National Financial Educators Council recommends doing a straightforward bank card interest calculation to assess how much you have to be paying every month. For instance, suppose you owe $3,000 on a bank card with an ARP of 25%:
Source: National Council of Financial Educators
2. Spending on luxury
Spending on luxury is the second largest expense for Americans, with an estimated $64.8 billion spent in 2020. SaveMyCent.
From 2020 to 2022, the acquisition of luxury goods within the US increased by greater than 10 billion, according to data (*4*)statisticsand this category is anticipated to grow steadily until 2028.
Should you want to save or avoid overspending, the report suggests being aware of selling terms and pictures that promote “exclusivity.” Want to buy a latest watch or handbag, but are you actually inside the budget to buy a Rolex or Chanel watch?
3. Overdraft Fees
Overdraft fees are the third largest cost of monetary illiteracy, averaging $17 billion a 12 months, according to the CFPB. Although banks offer overdraft protection that enables purchases even when there isn’t the complete amount within the account, the outcomes are damaging because the bank charges fees for the overdraft transaction.
While most overdraft transactions are for purchases of $24 or less, the median overdraft fee is $34, according to the CFPB. This will not look like much, but make a habit of it and these fees add up quickly.
4. Identity Theft and Fraud
Other common (and dear) mistakes include identity theft and fraud, which cost Americans a median of $6.9 billion and $5.8 billion a 12 months, according to data from FBI AND statistics.
While being a victim of identity theft and fraud could also be beyond our control, there are measures you may take to keep your accounts and private information protected, equivalent to creating strong passwords, organising account alerts, and checking your credit reports frequently.