America’s Growing Financial Literacy Problem
Making major personal finance decisions can be daunting for anyone.
Whether the decision is related to paying back student debt or how to invest for the first time, the outcomes of these decisions have a long-term impact on the quality of our lives. Smart decisions can lead to achieving financial independence, while bad decisions can lead to years of being stuck in the “hole”.
Even though it’s clear that financial literacy is important, there’s a big problem: it’s actually been dropping for years in the United States.
Diagnosing the Problem
Today’s infographic was done in conjunction with Next Gen Personal Finance, a non-profit that provides a free online curriculum of personal finance courses geared to students.
The graphic paints a troubling picture of the current financial literacy situation in the country, while demonstrating why personal finance is a crucial area of study for our youth.
Here are some of the indicators that show literacy is dropping:
- The U.S. ranks 14th globally in terms of financial literacy
- With a 57% literacy, the U.S. beats Botswana (52%) but gets edged out by countries like Germany (66%) or Canada (68%)
- Only 16.4% of U.S. students are required to take a personal finance class in schools
- 76% of millennials lack basic financial knowledge
- Between 2009-2015, Americans got worse at answering five key personal finance questions posed by FINRA – a major U.S. financial regulator
And worse, this lack of knowledge is translating into anxiety and even fear.
- Four of five adults say they were never given the opportunity to learn about personal finance
- 70% of millennials are stressed and anxious about saving for retirement
- 22% of millennials feel overwhelmed about their finances
- 13% of millennials feel scared
Meanwhile, student debt is soaring to new highs – how do we put our students in a better spot to succeed?
The Road Ahead
As financial products continue to increase in complexity, the road ahead is not an easy one.
However, there is still a great case for optimism: 60% of Americans say they know someday they will need to be more financially secure – they just don’t know how to get there. This number increases to 70% for those between the ages of 18-39 years old.
This means there is actually a great thirst for financial education out there – the question is just how to best deliver that information in a compelling way.
Another good sign? The youngest generation, Gen Z, is already starting to think about money differently:
Gen Z saw millennials struggle with wage stagnation and huge college debt, so they took note and are making a conscious effort to approach money and debt differently.
– Jason Dorsey, Center for Generational Kinetics
Real World Benefits
Increased financial literacy translates into real world benefits for individuals, and to the economy as a whole.
People with strong financial skills are better at job planning and saving for retirement. Meanwhile, financial savvy investors are more likely to diversify risk, and students that take a personal finance course see up to a 5.2% increase in credit scores within two years.
Lastly, consumers that understand compound interest:
- Spend less on transaction fees
- Accrue less debt
- Incur lower interest rates on loans
- Save more money
And this is just scratching the surface of what could be possible.
Making the right financial decisions can help people meet their own personal goals, live a life of abundance, get out of debt, and become financially independent.
This infographic was originally published on the Wealth 101: A Crash Course in Personal Finance minisite, a collaboration between NGPF and Visual Capitalist
How Does Your Personality Type Affect Your Income?
Can your Myers–Briggs personality type impact how much you make? See for yourself with this breakdown of average income for all 16 personality types.
How Does Your Personality Type Affect Your Income?
You’ve just finished giving a presentation at work, and an outspoken coworker challenges your ideas. Do you:
a) Engage in a friendly debate about the merits of each argument, or
b) Avoid a conflict by agreeing or changing the subject?
The way you approach this type of situation may influence how much money you earn.
Today’s infographic comes to us from Truity, and it outlines the potential relationship between personality type and income.
Through the Myers-Briggs Lens
The Myers-Briggs personality test serves as a robust framework for analyzing the connection between personality and income, in a way that is easily understood and familiar to many people.
The theory outlines four personality dimensions that are described using opposing traits.
- Extraversion vs. Introversion: Extroverts gain energy by interacting with others, while introverts draw energy from spending time alone.
- Sensing vs. Intuition: Sensors prefer concrete and factual information, while intuitive types use their imagination or wider patterns to interpret information.
- Thinking vs. Feeling: Thinkers make rational decisions based on logic, while feelers make empathetic decisions considering the needs of others.
- Judging vs. Perceiving: Judging types organize their life in a structured manner, while perceiving types are more flexible and spontaneous.
For example, someone who aligns with extraversion, sensing, thinking, and judging would be described as an ESTJ type.
The researchers surveyed over 72,000 people to measure these four personality preferences, as well as 23 unique facets of personality, income levels, and career-related data.
Traits With the Highest Earning Potential
Based on the above four dimensions, extroverts, sensors, thinkers, and judgers tend to be the most financially successful. Diving into specific personality characteristics, certain traits are more closely correlated with higher income.
|Personality Type||Average Income Advantage (Annual)||Trait(s) Most Correlated With Income Advantage|
|Extroverts||$9,347||Expressive, Energetic, Prominent|
|Thinkers||$8,411||Challenging, Objective, Rational|
For instance, extroverts are much more likely to have higher incomes if they are quick to share thoughts, have high energy, and like being in the public eye. Thinkers also score high on income potential, especially if they enjoy debates, make rational decisions, and moderate their emotions.
The Top Earners
Which personality types earn the highest incomes of all? Extroverted thinking types dominate the ranks again.
The one exception is INTJs, with 10% earning an annual salary of $150K or more in their peak earning years.
Personality and the Gender Pay Gap
With all these factors in mind, the researchers analyzed whether personality differences would affect the gender pay gap.
When the average salaries were separated for men and women, the results were clear: men of almost all personality types earn more than the average income for the sample overall, while all but two personality types of women earned less than the average.
In fact, women with high-earning personality types still earn less than men who do not possess those traits. For example, extroverted women earn about $55,000 annually, while introverted men earn an average of over $64,000.
Maximizing Your Potential
Are the introverted personalities of the world doomed to lower salaries? Not necessarily—while personality does play a role, many other factors contribute to income levels:
- Level of education
- Years of experience
- Local job market
- Type of industry
- The particular career
Not only that, anyone can work on the two specific personality traits most aligned with higher incomes: set ambitious goals, and face conflict head-on to ensure your voice is heard.
Mapped: The World’s Biggest Private Tax Havens
What countries or territories do the ultra-wealthy use as tax havens?
The World’s Biggest Private Tax Havens
When the world’s ultra-wealthy look for tax havens to shield income and wealth from their domestic governments, where do they turn?
If you’re putting money in offshore bank accounts in order to save on taxes, there are two main criteria you’re looking for: secrecy and accessibility. Based on pop culture and media reports, you might imagine a secretive bank in Switzerland or a tiny island nation in the Caribbean.
And though there is some truth to that logic, the reality is that the world’s biggest tax havens are spread all over the world. Some of them are small nations as expected, but others are major economic powers that might be surprising.
Here are the world’s top 20 tax havens, as ranked by the 2020 Financial Secrecy Index (FSI) by the English NGO Tax Justice Network.
Which Countries are the Biggest Tax Havens?
The FSI ranks countries and territories from all over the world on two criteria: secrecy and scale.
- Secrecy Score: How well the jurisdiction’s banking system can hide money. This includes analysis of ownership registration, legal entity transparency, tax and financial regulations, and cooperation with international standards.
- Global Scale Weight: What is the jurisdiction’s share of the world’s total cross-border financial services? This metric is based primarily on the IMF’s Balance of Payments statistics.
By weighing a country’s ability to hide money by its relative share of offshore financial services, we see the tax havens with the biggest impact on the global economy.
|1||🇰🇾 Cayman Islands||Caribbean|
|2||🇺🇸 United States||North America|
|4||🇭🇰 Hong Kong||East Asia|
|5||🇸🇬 Singapore||Southeast Asia|
|7||🇯🇵 Japan||East Asia|
|9||🇻🇬 British Virgin Islands||Caribbean|
|10||🇦🇪 United Arab Emirates||Middle East|
|12||🇬🇧 United Kingdom||Europe|
|13||🇹🇼 Taiwan||East Asia|
|17||🇹🇭 Thailand||Southeast Asia|
|19||🇨🇦 Canada||North America|
|20||🇶🇦 Qatar||Middle East|
At a glance, the top 20 tax havens are spread out across regions. Just under half of the list is located in Europe, but the rest are spread out across the Americas and Asia.
And the jurisdictions are opposites in many ways. They include financial powerhouses like the U.S., Japan, and the UK as well as smaller nations and territories like the Cayman Islands, Hong Kong, and Luxembourg.
But one surprising thing many of them have in common is a link to England. In addition to the UK, four of the top 20 tax havens—Cayman Islands, British Virgin Islands, Guernsey, and Jersey—are British Overseas Territories or Crown Dependencies.
Also worth noting is the importance of scale in the rankings. The highest ranking jurisdictions by secrecy score were actually the Maldives, Angola and Algeria, but they represent less than 0.1% of total offshore financial services.
Best Place To Hide Private Vs. Corporate Tax
Some of the listed tax havens might be confusing to nationals of those countries, but that’s where relativity is important. The U.S. and Canada might not be tax havens for American or Canadian nationals, but the ultra-wealthy from East Asia and the Middle East are reported to utilize them due to holes in foreign tax laws. Likewise, the UAE has reportedly become a tax haven for Africa’s ultra-wealthy.
In addition, many of the countries used as tax havens for individual wealth are also utilized by corporations.
The Tax Justice Network’s 2021 assessment of corporate tax havens listed the British Virgin Islands, Cayman Islands, and Bermuda as the top three tax corporate tax havens.
While individuals might create shell companies in tax havens to hide their wealth, corporations are usually directly incorporated in the tax haven in order to defer taxes.
But the tax haven landscape might soon shift. The G7 struck a deal in June 2021 to start taxing multinational corporations based on the revenue generated in each country (instead of where the company is based), as well as setting a global minimum tax of 15%. In total, a group of 130 countries have agreed to the deal, including India, China, the UK, and the Cayman Islands.
As the campaign to bring back deferred taxes ramps up, the question becomes one of response. Will the ultra-wealthy individuals and corporations start to work in tandem with the new rules, or discover new workarounds and tax havens?
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