Many Americans lack the basic financial knowledge and preparedness necessary to manage their personal finances, let alone their investments. And the low financial literacy level is significantly noticeable for workplace-only investors, according to a study, co-sponsored by FINRA.

Workplace-only investors, defined as those who only have retirement accounts through their employers, had a more difficult time with basic financial concepts, the report showed. When presented with financial literacy questions that measured understanding of interest rates, inflation and risk diversification—known as the Big Three rudimentary financial concepts—only 32% of workplace-only investors could answer the questions correctly, compared to 44% of active investors.

The study titled, New Evidence on the Financial Knowledge and Characteristics of Investors, conducted by the FINRA Investor Education Foundation and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business, examined nearly 15,000 Americans, aged 25 to 65, who were not retired or in school.

In addition to workplace-only investors and active investors -- those who have investments outside of an employer-provided retirement account -- the study also included non-investors for comparison purposes.

“Investors are seeing a rapid evolution of the financial landscape, from the introduction of more complex financial products and instruments to a fundamental shift in the retirement system that places responsibility for saving and investing squarely on the shoulders of individual Americans,” Gerri Walsh, president of the FINRA Foundation, said in a statement. "Fewer workers today have defined benefit pension plans and the rise of defined contribution plans, like 401(k)s, require an understanding of financial markets and basic personal finance that many investors lack."

As with the Big Three financial Literacy questions, the report noted that investors had difficulty answering questions connected to two areas of investment decision-making—asset pricing and risk diversification. Only 25% of workplace-only and 35% of active investors could correctly answer the asset-pricing question, which related to the understanding of the relationship between interest rates and bond prices.

As for the risk diversification question, which measures whether investors understand that a single company stock is riskier than a stock mutual fund, 46% of workplace-only investors answered correctly and about 60% of active investors got it right.

The research pointed out that access to and participation in financial education programs are likely reasons for financial literacy gap between workplace-only and active investors. It showed that among workplace-only investors, 28% were offered financial education in an educational institution or a workplace, compared to 42% among active investors.

At the same time, 13% of workplace-only investors were required to take financial education compared to 25% of active investors. And, less than 20% of workplace-only investors reported participating in a financial education program compared to 30% of active investors.

The data also showed that workplace-only investors have more debt (50%) than active investors (39%). They are also much more likely (49%) to have difficulties covering expenses and paying bills in a typical month than do active investors (38%).

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