America Gets a D in Financial Literacy; According to a Bankrate Survey, Knowing What to Do Isn't Enough...

Business Editors

NEW YORK--(BUSINESS WIRE)--March 17, 2003

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Americans aren't flunking financial literacy, but they're close. With an average grade of 66, Americans get a "D" in their handling of important money matters, according to Bankrate.com's Financial Literacy benchmark survey released today.

The nationally representative survey of 1,000 Americans, conducted for Bankrate by RoperASW, looks at whether Americans know the importance of fundamental money-smart moves -- many do! -- but then the research goes further. It also determines whether they act on that knowledge in managing their money. The results can be found at http://www.bankrate.com/financialliteracy.

"Many Americans know what they should do, but don't do it -- and that's a costly mistake for millions of people," said Bankrate, Inc. president and CEO Elisabeth DeMarse. "No one would want to show this report card to their parents."

"We created a test of Financial Literacy using 12 basic 'planks' that Americans should know and put into practice," added DeMarse. "Questions included, 'Have you prepared a will?' and 'Have you started an emergency fund?' Based on these answers, it is clear that there is a large gap between knowledge and action."

To get the grade, Bankrate converted the 12 questions into a 100-point scale. With an average grade of 66, America would get a "D."

"Americans who scored an A or a B on our Financial Literacy Test," DeMarse continued, "are enjoying of one point less on their mortgage than those who scored F. On a $150,000 mortgage, that difference represents a savings of $103.68 a month. The 'financial literates' also feel more satisfied with their personal financial situation and better about their money management skills. They are more in control and confident when dealing with their finances."

According to DeMarse, while many Americans express confidence in money management and feel in control when dealing with their finances, there is an attitude and action gap when it comes to many of the 12 basic steps to financial literacy. This gap is holding back many Americans from forging the financial future that they want. For example, 59 percent of Americans feel they are in control of their personal finances, yet 58 percent indicated they had not refinanced their mortgage during this last year of record low rates and 59 percent did not know how much life, auto or health insurance they should carry.

Other significant findings included:

-- We learn to behave in financially literate ways as we grow older. Older Americans tended to be smarter about their money moves than younger Americans.

-- Gender makes no difference: Women are no more or less financially literate than men.

-- The financially literate use the Internet to their financial advantage. While Internet access is equal between the "A/B" group and the "F" group, those who got an "A" or "B" were twice as likely to use the Internet to manage their finances.

-- Only 10 percent of Americans received an "A" in Bankrate's financial literacy report card. 16 percent received a "B." 19 percent a "C." 20 percent a "D" and 35 percent received a failing "F."

So what is the profile of the most financially literate?

-- Over 50 years in age, married with children, a higher

household income, using the Internet to manage their finances,

being a saver and planning carefully when making decisions.

-- "Financial literates" place more importance on key money

management behaviors. Among those who have a mortgage, 81

percent of "A" and "B"'s feel comparison shopping for their

mortgage is very important, while only 46 percent of "F"'s

feel this same way.

Additional findings included:

-- America's money mood is both confident and concerned. 7 in 10

Americans are satisfied with their personal finance situation

and believe they are good to excellent at managing their

money.

-- 6 in 10 Americans say they feel in control when dealing with

their finances.

-- When asked to name their worst financial fears from a list of

10 choices, 79 percent of Americans fear that terrorism will

weaken the U.S. economy, while roughly half the American 

public is concerned about their lack of savings. Fifty-five

percent fear they do not have enough money put away for an

emergency.

-- Roughly one in three Americans are worried about losing their

jobs, that their employer will decrease their benefits, that

their home will lose value, or that they will not be able to

pay their mortgage or rent.

-- Despite viewing themselves as good money managers, more than

half of Americans feel that if they had more time, they could

get their finances in better order.

-- While 66 percent of Americans know that keeping an emergency

fund is very important, only 40 percent are actually doing it

all the time.

Bankrate plans to monitor financial literacy on an annual basis as part of their mission to create a neutral marketplace between banks and consumers. A financial literacy quiz will be posted on Bankrate.com that will lead visitors to editorials that will help them either learn about areas that are new to them or to provide "how-to" advice about programs for saving or borrowing.

To learn more about the study, and its affect on all Americans, go to http://www.bankrate.com/financialliteracy.

About Bankrate Inc.

Bankrate, Inc. (Nasdaq:RATE) owns and operates Bankrate.com, the Internet's leading consumer banking marketplace. Bankrate.com averages 4 million unique visitors per month, according to comScore Media Metrix, which ranks Bankrate.com first in unique visitors in the "Financial information and advice" category. Bankrate.com reviews more than 4,800 financial institutions in more than 170 markets in 50 states. Bankrate.com is a destination site of personal finance channels, including banking, investing, taxes and small business finance. It is the leading aggregator of over 100 financial products, including mortgages, credit cards, new and used auto loans, money market accounts and CDs, checking and ATM fees, home equity loans and online banking fees.

Bankrate.com provides financial applications and information to a network of more than 80 partners including Yahoo! (Nasdaq:YHOO), Wall Street Journal (NYSE:DJ; dj.com) America Online (NYSE:AOL), and SmartMoney.com. Bankrate.com's information is also distributed through more than 100 national and state publications.