SouthernWorldwide.com – Americans’ comprehension of fundamental financial concepts has declined to a ten-year low, sparking worries about households’ preparedness for managing debt, savings, and retirement. This finding comes from a recent study conducted by the investment firm TIAA in collaboration with Stanford University’s Global Financial Literacy Excellence Center.
In 2025, U.S. adults managed to correctly answer only 47% of the 28 questions designed to gauge financial literacy. This marks a decrease from the peak score of 52% recorded in 2020 and represents the lowest performance since the survey’s inception a decade ago. The study further indicated that a growing proportion of Americans, now at 25%, exhibit very low financial literacy, an increase from 20% ten years prior.
These results are concerning because a lack of financial literacy is associated with poorer financial outcomes, including higher debt levels. Surya Kolluri, head of the TIAA Institute, shared with CBS News that while the survey did not pinpoint the exact reasons for the decline, potential contributing factors include the prevalence of misleading financial information on social media, a general dip in overall literacy, and the existing financial pressures faced by many households.
“Individuals with lower financial literacy are four times more likely to struggle with making ends meet,” Kolluri stated.
The study also revealed that women and younger adults scored lower than other demographics. Women answered 44% of the questions correctly, in contrast to 50% for men. Gen Z adults, aged 18 to 29, recorded the lowest generational score at 38%, while baby boomers achieved the highest at 54%.
While the generational gap can partly be attributed to the age of Gen Z individuals, many of whom may not yet be familiar with retirement-related topics covered in the survey, Kolluri also suggested that financial challenges faced by young people, such as substantial student loan debt and the perceived inaccessibility of homeownership, might play a role.
Financial burden
Economists and experts are also highlighting a broader issue: whether the responsibility for financial understanding should rest solely on consumers, or if the complex financial system itself needs reform to simplify comprehension of financial products and agreements. They argue that attributing consumers’ lack of understanding of increasingly intricate products might overlook the core problem.
As noted by Harvard University economist John Campbell and Imperial College London economist Tarun Ramadorai in a 2025 book, the U.S. retirement system “appears too complex for many people to understand.”
However, despite the significant increase in the complexity of financial services, many fundamental concepts have remained consistent, according to Matt Schulz, chief consumer finance analyst at LendingTree.
“Certainly, much has changed in the financial services landscape over the past decade or more, but the core principles of financial knowledge have largely stayed the same,” he remarked. “The fact that people are performing progressively worse on these types of assessments is indeed troubling.”
Schulz believes that the decline could be influenced by the proliferation of financial information on social media, a significant portion of which is inaccurate. Consumers lacking a solid grasp of financial basics may find it difficult to differentiate between sound and poor advice.
“Determining which financial content to follow and trust has never been more challenging,” he commented. “There is an immense amount of highly intelligent and insightful personal finance information available, but there is also a vast quantity of misinformation, and failing to distinguish between the two can be costly.”
Critics within the financial industry also assert that companies such as banks, credit card providers, insurance firms, and others often intentionally complicate their offerings, obscuring critical details within fine print or lengthy disclosure statements. Furthermore, many significant personal finance decisions, like purchasing a home or planning for retirement, involve sums of money far exceeding typical everyday transactions.
Can you answer the questions correctly?
TIAA has released eight questions from its financial literacy test for the public to attempt. See if you can answer them accurately.
1. Mark’s salary has increased over the past two years. What would be a plausible reason for this?A. The number of workers with Mark’s skills increased where he lives and worksB. New technology reduced the demand for workers with Mark’s skillsC. Mark completed several training courses at a local collegeD. Don’t know
2. A household budget cannot be used for which of the following?A. To track household financial assetsB. To plan for necessary household expensesC. To plan household discretionary spendingD. Don’t know
3. Akiko has $1,000 in savings that earns a 2% rate of return over the course of the year. The inflation rate during the year is 3%. Which statement is true?A. She can afford to buy fewer things at the end of the yearB. She can afford to buy more things at the end of the yearC. It’s not clear whether she can afford to buy more things or fewer things at the end of the yearD. Don’t know
4. Which statement about investing is correct?A. Investing in the stock of a single company is typically safer than investing in a mutual fund that holds shares of many companies in multiple industriesB. Investing in a mutual fund that holds shares of many companies in multiple industries is typically safer than investing in the stock of a single companyC. Investing in the stock of a single company and investing in a mutual fund that holds shares of many companies in multiple industries are typically equally safeD. Don’t know
5. José owes $1,000 on a loan that has an interest rate of 20% per year compounded annually. If he makes no payments on the loan, at this interest rate, how many years will it take for the amount he owes to double?A. Less than 5 yearsB. 5 to 10 yearsC. More than 10 yearsD. Don’t know
6. Katherine is a single 25-year-old worker who is in good health. What type of insurance coverage is she most likely to need in the near term?A. Life insuranceB. Disability insuranceC. Long-term care insuranceD. Don’t know
7. Lottery A pays a prize of $200, and the chance of winning is 5%. Lottery B pays a prize of $90,000, and the chance of winning is 0.01%. Expected winnings are greater in which lottery?A. Lottery AB. Lottery BC. They are equalD. Don’t know
8. Which of the following appears to be inappropriate investment advice for the respective individual?A. A stock index fund to a 30-year-old worker saving for retirementB. A bond fund to a 60-year-old worker for some of her retirement savingsC. A stock fund that invests in small start-up businesses to a 75-year-old retireeD. Don’t know
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Answers, with the percentage of Americans who answered the question correctly:
