MADISON, Wis. (7/9/15)--Financial acumen is the best defense in the event of an economic downturn, a CUNA economist told Quartz, a digital news site for the global economy.
The recent financial downturn provided some evidence of that shortcoming among American consumers, Perc Pineda, CUNA senior economist said. Many Americans failed to set aside money while piling up credit card debt at the same time, leaving no cushion when times got tight.
“Citizens who are financially literate will have better coping mechanisms when faced with an economic slowdown,” Pineda told Quartz.
Most U.S. consumers are still living paycheck to paycheck. According to a 2013 survey of 4,000 adults by the Federal Reserve, only 39% of adults had adequate funds saved to cover three months of expenses. Just 48% of respondents said they can completely cover a hypothetical emergency expense of $400 without selling something or borrowing money.
Such numbers show that consumers lack skills and education in managing money, the Quartz article said. “Financial literacy--understanding how financial systems work in America, and why they are trustworthy--encourages people to save their money, and to put their money in the capable hands of financial institutions,” the article said.