'They Don't Have A Clue': 95% Of Americans Struggle With Financial Literacy, According To Suze Orman — Are You Part Of The Informed 5%?

During a recent appearance on “Who’s Talking to Chris Wallace?” on Max, personal finance expert Suze Orman expressed her belief that most Americans lack financial literacy. 

“Truthfully, probably 95%,” Orman estimated when Wallace asked about the percentage of Americans who are financially illiterate.

Explaining the issue further, Orman said, “I tell somebody to do a Roth IRA. They don't have a clue what I'm talking about. I ask somebody, what's in your retirement account? … They don't have a clue. They don't have a will. They don't have a trust. They don't have a durable power of attorney for healthcare or an advanced directive. They don't know what a 529 plan is. They don't understand.”

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Key statistics from Annuity.org reveal that 75% of American teens lack confidence in their knowledge of personal finance, and 25% of Americans don't have anyone they can ask for trusted financial guidance. In addition, 23% of U.S. adults ages 18 to 29 have credit card debt that's more than 90 days overdue, and the nation owes over $1.03 trillion in credit card debt as of the second quarter of 2023.

Sixty percent of nonretirees don't think their retirement savings are on track, and 42% of adults worry about meeting their daily expenses. The lack of financial knowledge not only affects short-term financial stability but also long-term financial security.

To understand whether you’re among the financially literate, consider the following points:

Know your monthly income and expenses: Understanding your after-tax income and monthly expenses is crucial. This includes tracking daily purchases and ongoing payments and using tools like apps or traditional methods to monitor spending​​.

Understand your credit scores: Be aware of your FICO score and other credit scores. Regularly check your credit reports from Experian, Equifax and TransUnion to ensure accuracy and to guard against identity theft​​.

Be aware of credit card debt: Knowing the amount of credit card debt you carry and its interest rates is important. Prioritize paying off high-interest debt and manage credit card usage responsibly​​.

Budgeting skills: Being financially literate means being a habitual budgeter, understanding how to save for goals and delaying gratification for financial peace of mind​​.

Emergency preparedness: Financially literate people know the importance of having an emergency fund covering at least $1,000 initially and then three to six months of expenses​​.

Debt management: Understanding the impact of debt on your ability to invest in the future and making informed decisions about paying off debt is a key aspect of financial literacy​​.

Education and continuous learning: Financial literacy is an ongoing process. Engaging in financial education, whether through courses, books, podcasts or workshops, is crucial for developing and maintaining financial literacy.

For those seeking more personalized guidance, consulting with a financial adviser can be a valuable step. A financial adviser can offer tailored advice on budgeting, debt management, investment strategies and overall financial planning to help you navigate your financial journey more effectively.

Financial literacy is essential for managing personal finance effectively, including budgeting, handling emergencies, managing debt and investing for the future. By assessing your knowledge and skills in these areas, you can determine whether you are part of the financially literate minority and take steps to improve your financial literacy if necessary.

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Jeannine has written about personal finance and investment for the past 13 years at a variety of publications including Zacks, The Nest, and eHow. She is not a licensed financial advisor and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Jeannine believes that the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.