Financial Literacy Gap Hinders Opportunities
A recent survey by Santander highlights a missed opportunity for middle-income Americans to offset inflation and rising costs through higher savings rates. The survey indicates that 84% of respondents have savings, but a staggering 75% earn less than 3% on those funds. The major hurdle? A lack of financial knowledge, with just 11% able to answer basic questions about savings accounts.
Federal Reserve’s Impact on Rates
Amidst the ongoing battle against soaring inflation, the Federal Reserve has raised interest rates 11 times since March of the previous year. While this has led to historic highs in credit card and auto loan interest rates, it also presents an opportunity for higher earnings on savings. However, the survey suggests that many are missing out due to financial literacy gaps.
The Role of Student Loan Debt
Student loan payments resumed in October after a three-year pause, impacting Americans’ financial well-being. The survey reveals that 69% of those with student debt fear its hindrance to achieving financial prosperity. Interestingly, even those without student debt feel its indirect impact, with 13% assisting someone in their household with repayments.
Vehicle Financing Dilemmas
A significant revelation from the Santander survey is the impact of rising gas prices and auto costs on vehicle access. Despite 76% of middle-income Americans relying on a vehicle for their work commute, 50% have delayed purchasing a car in the past year. This challenge doesn’t dampen car demand, with 41% considering a purchase in the next 12 months, contingent on securing financing.
Rising Auto Loan Costs
The survey sheds light on the financial strain caused by increased borrowing costs for vehicles. Both new and used annual percentage rates (APR) have reached levels not seen since the Great Recession, hitting 7.4% and 11.2%, respectively. On average, borrowers are shelling out $736 per month on auto loans. The situation prompts a call for consumers to explore ways to control ownership costs, including evaluating insurance needs.
Seeking Solutions: A Call to Action
The Santander survey underscores the need for financial education, particularly in the face of economic challenges. As interest rates fluctuate and financial landscapes evolve, it becomes imperative for individuals to equip themselves with the knowledge needed to make informed decisions. Whether navigating savings accounts, managing student loan debt, or contemplating a vehicle purchase, understanding the financial landscape is crucial for securing one’s economic well-being.
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