Most Americans Don’t Understand Basic Economics

New survey shows the majority of consumers can’t correctly answer questions about borrowing, interest rates and even basic math.

The Center for Economic and Entrepreneurial Literacy (CEEL) recently released a new survey underscoring the need for increased education on personal finance and economic issues. The national survey shows an overwhelming number of Americans are unable to answer some of the most basic questions about borrowing, interest rates, terminology and even basic math. More troubling is that many Americans admit to making poor decisions with their own personal finances.

Startling highlights from the survey include:

• 54 percent of respondents could not identify what a subprime mortgage was.
• 56 percent of respondents could not identify FICO score as the most important factor in getting a loan.
• 65 percent of respondents could not identify what would remain if you subtracted 25 percent from 8. One in three respondents could not identify what 1 percent of 50,000 was.
• 75 percent did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers, credit card advances and short-term payday loans.
• Half of respondents have overdrafted their checking account at one time, while a third of respondents have paid a bill late in the past year.
• 35 percent of respondents admitted to not having a family or personal budget that would allow them to conceivably eliminate their credit card debt by the end of 2009.