The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index)

The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index)

The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) measures knowledge and understanding that enable sound financial decision making and effective management of personal finances among U.S. adults. The P-Fin Index is an annual survey developed by the TIAA Institute and the Global Financial Literacy Excellence Center, in consultation with Greenwald & Associates. It is unique in its breadth of questions and its coverage of the topics that measure financial literacy. The index is based on responses to 28 questions across eight functional areas: earning, consuming, saving, investing, borrowing/managing debt, insuring, comprehending risk, and go-to information sources.

The initial wave of the survey was fielded online in September 2016 to a nationally representative sample of U.S. adults, ages 18 and older. Each year, the survey oversamples a particular demographic group to better understand the financial literacy levels and financial behaviors of that group. Because the P-Fin Index is an annual study, future waves will enable trend analysis of overall personal finance knowledge, as well as knowledge in the different functional areas and across demographic groups.

Highlights from the latest survey

Summary of findings from the 2018 P-Fin Index

  • Many Americans lack personal finance knowledge that enables sound financial decision making. On average, U.S. adults answered 50% of the 28 survey questions correctly.
  • Sixteen percent demonstrated a relatively high level of personal finance knowledge and understanding, i.e., they answered more than 75% of the index questions correctly, while 21% showed a relatively low level, i.e., they answered 25% or fewer of the questions correctly.
  • Personal finance knowledge is lowest in the area of comprehending risk with only 35% of questions on risk answered correctly, on average.
  • Personal finance knowledge is highest in the area of borrowing and debt management. On average, 60% of the borrowing questions were answered correctly. Knowledge and understanding may emerge from confronting accumulated debt, often from early on in the life cycle.
  • Financial literacy is significantly higher among men than women; with a share of 21% of men answering 75% of the P-Fin Index questions correctly compared to a share of 12% among women.
  • Personal finance knowledge is positively correlated with both general education and financial education, a finding consistent with previous research.
  • Individuals with greater personal finance knowledge are more likely to have positive personal finance experiences, such as planning and saving for retirement and for other reasons.
  • Overall, these figures are consistent with the findings from the 2017 P-Fin Index.

Less than one in five U.S. adults demonstrated a relatively high level of personal finance knowledge by answering more than 75% of the survey questions correctly. Low levels of financial literacy, among not only the young but also people close to retirement, show we need to step up the effort to promote financial knowledge across the entire population.

— Annamaria Lusardi