Knowledge is power, unless your perspective on time is creating a mental block toward strong financial health. Understanding mathematical skills and key financial concepts is critical for financial literacy, but knowledge alone fails to compensate for shortcomings caused by our personal behavior.
A high degree of financial acumen is not a strong predictor of financial health. In fact, your approach to the past, present, and future provides more meaningful correlations, according to new research from Magnify Money and Philip Zimbardo, professor emeritus of psychology at Stanford University. Subjects who perceive themselves as financially literate also fail to show a higher degree of financial health. For example, millennials think they are less financially literate, but actually demonstrate better financial health than baby boomers.
The study involved more than 3,000 people in six different countries. The United Kingdom had the highest percentage of financially healthy individuals, with 51.9 percent of individuals posting high scores, followed by Germany (40.9 percent), the United States (33.2 percent), Italy (18.1 percent), and Hong Kong (17 percent). Brazil came in last place, with only 14.1 percent.
Someone who is considered financially sick would be: highly likely to borrow money from payday lenders, likely to have filed bankruptcy or experience foreclosure, likely to carry a balance on credit cards, and unlikely to even know the interest rate on his or her debt.