Americans Lost an Average of $1,506 to This Big Money Problem in 2023. Here’s How to Protect Yourself

Americans work hard, and love to make money, but they often struggle to make the most of it. Too many Americans are living paycheck to paycheck, juggling debt payments, and making risky investments. There’s one root cause to many Americans’ larger challenges with money: a lack of financial literacy.

According to a recent survey from the National Financial Educators Council (NFEC), Americans are losing a shocking amount of money because of this big reason. Let’s look at what financial literacy means for your bank account.

Financial literacy: Big problem, big losses

The National Financial Educators Council (NFEC) released a survey showing that in 2023, the average American lost $1,506 due to a lack of financial literacy. That amounts to about $125.50 per month per person, or $388 billion for all American adults combined.

If you could wave a magic wand to suddenly get rid of $125.50 of monthly expenses and have an extra $1,506 in your savings account by the end of the year, would you do it? That’s the power of financial literacy. Just by learning about a few key financial concepts, more Americans can get empowered to keep more of their money — and have more cash ready for saving, investing, and building for the future.

How financial literacy improves your financial life

Here are a few examples of how better financial literacy can help you take control of your personal finances.

1. Avoid paying credit card interest

One aspect of financial literacy that can make a big difference in people’s lives is understanding how credit cards and personal loan interest work. When you do not pay off the full balance on your credit card each month, the bank can charge you interest. Even on the best credit cards, APRs can be over 20% per year — that means $1,000 of credit card debt would rack up over $200 of interest in one year.

Rewards credit cards can be lots of fun, and sometimes credit card debt can be necessary and worth paying for. But most people should avoid carrying a balance on credit cards. Better financial literacy can help people avoid the pitfalls of credit card debt.

2. Understand bank account fine print

Opening a bank account might sound simple and straightforward, and banks typically do a good job of informing customers about how their accounts work. But part of financial literacy means watching out for the fine print on every bank account you open. Some bank accounts might charge monthly account maintenance fees, require minimum balances, or have tiered interest rates that pay a higher savings account APYs on different balances.

When you’re empowered with financial literacy to read the fine print, you’ll know how to avoid unwanted bank account fees and get the most value out of your banking relationships.

3. Stay away from risky investments

There are no guarantees in investing, but better financial literacy can improve your odds of success. Meme stocks and other investments with lots of social media buzz can be fun in the short run, but don’t bet your retirement on it. Some investors (like Motley Fool Stock Advisor) have a solid track record of beating the market, but most people aren’t good at picking stocks in the long run.

Better financial literacy can help people understand how to build wealth for the future — with smart, risk-conscious strategies like diversified portfolios of low-cost ETFs, automated investing from the best robo-advisors, and fiduciary financial advice from professionals.

Bottom line

Financial literacy is an essential skill for everyday life, and a lack of it is costing Americans thousands of dollars. People work hard for their money, and they don’t deserve to lose it to unfair fees, unclear rules, and unsound investments.

By understanding bank account fees, avoiding credit card debt, and making smarter choices when buying stocks, financial literacy can help Americans get more out of their money for years to come.

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