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Many U.S. Teens Lack Financial Literacy In World Study

By Walter Hamilton, Los Angeles Times

The financial literacy of American teenagers is no better than average compared with their peers in other countries, and nearly one in five lacks basic proficiency, according to a new study.

The report by the Organization for Economic Cooperation and Development analyzed financial knowledge among 15-year-olds in 18 nations.

Teenagers in China, Belgium and Estonia fared the best. U.S. teens were ninth, with an overall numerical ranking that was slightly below average.

Nearly one in 10 American students was in the top-performing category, nearly on par with their peers around the world. But 17.8 percent lacked basic proficiency, worse than the 15.3 percent global average, the study found.

Financial literacy is crucial given that people are increasingly responsible for making their own decisions on complex topics such as student loans and retirement planning.

“The better an individual understands financial concepts and products, the more informed he or she will be when making financial decisions,” the report said. “These decisions affect not only individual households, but ultimately the economic health of the wider society.”

Despite efforts to improve basic awareness, studies have consistently shown that Americans of all ages don’t understand rudimentary principles of finance and investing. That includes well-educated and upper-income people, experts say.

“The lack of financial literacy cuts across Americans from all walks of life,” said Carrie Schwab-Pomerantz, president of the Charles and Helen Schwab Foundation. “It’s blind to gender or socioeconomic status or even age.”

The study was done through the OECD’s Program for International Student Assessment.

Photo: Miggslives via Flickr

‘Modern’ Families Struggle More Financially Than Conventional Ones, Study Says

By Walter Hamilton, Los Angeles Times

Nontraditional families, such as those headed by single parents or same-sex couples, are in far worse financial shape than conventional households headed by married heterosexuals with children, according to a new study.

Nontraditional families fare much worse across a variety of measures, including their ability to save money for emergencies and their own sense of economic well-being, according to the survey by insurance company Allianz.

Nearly half of so-called modern families, for example, live paycheck to paycheck. That compares with 41 percent of conventional households, according to the survey.

Only three in 10 nontraditional households have a high degree of confidence in their financial well-being versus 41 percent for their conventional counterparts.

The financial woes of modern families are a big issue given the growth of nontraditional structures in recent decades. Only 19.6 percent of U.S. households are composed of married heterosexual couples with children, down from the 40.3 percent in 1970, according to Allianz.

Aside from same-sex couples and single-parent homes, Alllianz defined nontraditional families as those with three or more generations living under one roof; blended families in which at least one parent has a child from a prior relationship; older parents with young children; or parents whose adult children live with them.

“New family structures have a direct impact on a family’s relationship with money and finances — and we found that, while modern families have similar strong emotional ties, they often feel financially less secure than their traditional counterparts,” said Katie Libbe, an expert on consumer insights at Allianz.

Photo: Evil Erin via Flickr

Reliance On 401(k) Accounts Drops, Poll Shows

By Walter Hamilton, Los Angeles Times

Fewer Americans are counting on 401(k) accounts to fund their retirement years, apparently because of disappointment with the stock market after painful losses in the Great Recession, according to a recent study.

Only 48 percent of non-retirees expect a 401(k), individual retirement account or similar savings vehicle to be a major source of retirement income, according to a Gallup poll. That’s up from 46 percent last year but down from 54 percent in early 2008, just before the worst of the global financial crisis struck.

Even though the stock market has recouped its crisis-era losses and gone on to a series of new highs, many small investors missed the gains because they bailed out before that.

Confidence in 401(k)s has improved in recent years from a low of 42 percent in 2009, according to the poll. But that’s fairly unimpressive, given the resurgence in stock prices.

A bit more than 3 in 10 non-retirees expect to rely heavily on Social Security, according to the poll.

That number has grown in the aftermath of the Great Recession.

From 2002 to 2007, the portion of non-retirees expecting to count heavily on Social Security fluctuated between 25 percent and 29 percent. From 2008 to 2014, by contrast, the range increased to 30 percent to 34 percent.

Photo: Tax Credits via Flickr

Number Of Stay-At-Home Mothers On The Rise, Study Says

By Walter Hamilton, Los Angeles Times

LOS ANGELES — The percentage of mothers who stay home with their children is rising due to shifting demographics and a troubled job market.

The portion of stay-at-home mothers with children under age 18 rose to 29 percent in 2012 from 23 percent in 1999, according to a new Pew Research Center analysis of government data. Prior to that, the share of stay-at-home moms had declined for three decades as women in general flooded into the workforce.

The increase in home-based mothers is driven partly by the desire to focus on children. But it’s also partially a result of economic hardship for those lower on the financial rungs.

One-third of stay-at-home mothers live in poverty, compared with 12 percent for their counterparts who work outside the home. Stay-at-home mothers also are more likely than working moms to be immigrants and less likely to be white, according to the report.

“For a variety of reasons — from a tough job market to changing demographics — we’re seeing an uptick in the share of mothers who are staying at home,” said D’Vera Cohn, one of the report’s authors.

“Stay-at-home mothers are a diverse group,” Cohn said. “They are younger and less educated than their working counterparts, and more likely to be living in poverty. Many are staying at home to care for family, but some are home because they can’t find jobs, are enrolled in school or are ill or disabled.”

The financial status of stay-at-home mothers depends partly on marital status.

Married stay-at-home moms are generally better educated and less likely to live in poverty, according to Pew. The vast majority of married stay-at-home mothers — 85 percent — say they stay home to care for their families, though a rising portion — 6 percent — complain that they can’t find a job.

Single or co-habitating mothers, by contrast, are likelier to be at home because they are unemployed, disabled or enrolled in school.

Currently, 28 percent of American children are being raised by a stay-at-home mother. That’s up from 24 percent in 2000 but down from 48 percent in 1970, according to Pew.

Lisa Sjolund via Flickr.com

Number Of Millionaires In U.S. Reaches A New High

By Walter Hamilton, Los Angeles Times

There are more millionaires in the United States than ever before.

The number of households with net worth of $1 million or more, excluding their homes, is at a record 9.63 million, according to a new report.

That eclipses the old mark of 9.2 million in 2007 before the global financial crisis, according to the Spectrem Group research firm. The tally of millionaires slipped to 6.7 million in 2008 as the financial crisis struck.

The study reinforces other data showing that the wealthy are doing well compared to many other segments of society.

“Most of the financial damage done by the recession has been erased by recent record-high markets in 2013 as well as continued rebound in the real estate markets,” said George H. Walper Jr., Spectrem president. “In terms of the affluent investor, it is fair to say they have finally recovered from the economic downturn.”

Rich people have been helped by the rebound in the stock market and the recovery in home prices in more exclusive areas. They also got a boost from superior creditworthiness, which allowed them to take advantage of record low interest rates in recent years.

The number of households with $25 million or more also is at a new high of 132,000, surpassing 125,000 in 2007, according to Spectrem.

And the number of families with $100,000 or more continues to climb. It’s now at 38.6 million, up from 37.4 million last year and 31.2 million in 2008.

Photo: “kaje_yomama” via Flickr