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
Sustainable Investing: Debunking 5 Common Myths
Do sustainable strategies underperform conventional ones? This infographic shines a light on the realities of sustainable investing and the ESG framework.
Sustainable Investing: Debunking 5 Common Myths
It began as a niche desire. Originally, sustainable investing was confined to a subset of investors who wanted their investments to match their values. In recent years, the strategy has grown dramatically: sustainable assets totaled $12 trillion in 2018.
This represents a 38% increase over 2016, with many investors now considering environmental, social, and governance (ESG) factors alongside traditional financial analysis.
Despite the strategy’s growth, lingering misconceptions remain. In today’s infographic from New York Life Investments, we address the five key myths of sustainable investing and shine a light on the realities.
|Sustainable strategies underperform conventional strategies||Sustainable strategies historically match or outperform conventional strategies|
In 2015, academics analyzed more than 2,000 studies—and found that in roughly 90% of the studies, companies with strong ESG profiles had equal or better financial performance than their non-ESG counterparts.
A recent ranking of the 100 most sustainable corporations found similar results. Between February 2005 and August 2018, the Global 100 Index made a net investment return of 127.35%, compared to 118.27% for the MSCI All Country World Index (ACWI).
The Global 100 companies show that doing what is good for the world can also be good for financial performance.
—Toby Heaps, CEO of Corporate Knights
|Sustainable investing only involves screening out “sin” stocks||Positive approaches that integrate sustainability factors are gaining traction|
In modern investing, exclusionary or “screens-based” approaches do play a large role—and tend to avoid stocks or bonds of companies in the following “sin” categories:
However, investment managers are increasingly taking an inclusive approach to sustainability, integrating ESG factors throughout the investment process. ESG integration strategies now total $17.5 trillion in global assets, a 69% increase over the past two years.
|Sustainable investing is a passing fad||Sustainable investing has been around for decades and continues to grow
Over the past decade, sustainable strategies have shown both strong AUM growth and positive asset flows. ESG funds attracted record net flows of nearly $5.5 billion in 2018 despite unfavorable market conditions, and continue to demonstrate strong growth in 2019.
Not only that, the number of sustainable offerings has increased as well. In 2018, Morningstar recognized 351 sustainable funds—a 50% increase over the prior year.
|Interest in sustainable investing is mostly confined to millennials and women||There is widespread interest in sustainable strategies, with institutional investors leading the way|
Millennials are more likely to factor in sustainability concerns than previous generations. However, institutional investors have adopted sustainable investments more than any other group—accounting for nearly 75% of the managed assets that follow an ESG approach.
In addition, over half of surveyed consumers are “values-driven”, having taken one or more of the following actions with sustainability in mind:
- Boycotted a brand
- Sold shares of a company
- Changed the types of products they used
Women and men are almost equally likely to be motivated by sustainable values, and half of “values-driven” consumers are open to ESG investing.
5. Asset Classes
|Sustainable investing only works for equities||Sustainable strategies are offered across asset classes|
This myth has a basis in history, but other asset classes are increasingly incorporating ESG analysis. For instance, 36% of today’s sustainable investments are in fixed income.
While the number of sustainable equity investments remained unchanged from 2017-2018, fixed-income and alternative assets showed remarkable growth over the same period.
Tapping into the Potential of Sustainable Investing
It’s clear that sustainable investing is not just a buzzword. Instead, this strategy is integral to many portfolios.
By staying informed, advisors and individual investors can take advantage of this growing strategy—and improve both their impact and return potential.
Venture Capital Mega-Deals on Pace to Set New Record in 2019
With bigger deals and multi-billion dollar IPOs, venture capital financing is reaching new heights. This infographic explores the latest trends.
The Rise of Mega-Deals in Venture Capital Financing
Venture capital “mega-deals”—which rake in $100 million or more—have taken off at breakneck speed. A total of 185 were signed by the end of September, setting the pace for a record number of mega-deals in 2019.
Interestingly, mega-deal counts aren’t the only thing ballooning in venture capital financing. Almost everything has gotten bigger: venture capital funds, deal sizes, and exit valuations.
Today’s infographic comes from Pitchbook’s quarterly Venture Monitor, and visualizes the trends shaping the U.S. venture capital landscape.
Venture capital fundraising remains robust, with $29.6 billion raised across 162 funds year-to-date. Not only that, a higher proportion of funds are quite large. Roughly 9% were sized $500 million or more, with 15 such mega-funds closed year-to-date.
What does it mean to “close” a fund? Before they can begin operations, a venture capital fund manager will raise money from investors. The fund closes to signify the end of a fundraising round and can go through multiple closings until it reaches its targeted fundraising amount.
In the coming years, fundraising will likely remain strong. Venture capital net cash flows have been positive since 2012, which means capital is being returned to the limited partners of a fund faster than they can reinvest it into new vehicles.
With this excess cash, investors will likely contribute to the next round of venture capital funds—continuing the virtuous cycle.
Total deal value is set to surpass $100 billion for a second consecutive year, partly driven by the rise of mega-deals. At every stage of startup financing, average deal sizes remain elevated.
While the focus has shifted to the massive amount of capital available at later stages, angel and seed-stage deals are still quite healthy, with an average deal size of over $2 million.
At late financing stages, the 2019 average deal size is nearly $35 million, second only to 2018’s record of $44 million. Companies continue to raise large sums of capital prior to going public, with 140 late-stage mega-deals completed in 2019.
Total exit value reached $200 billion for the first time in a decade. Interestingly, initial public offerings (IPOs) comprised a whopping 82% of overall exit value.
Multi-billion dollar IPOs continue to dominate headlines, with six such public debuts occurring in the third quarter.
|Company||Industry||Pre-Money Valuation at IPO||Amount Raised at IPO|
|Datadog||Network Management Software||$7.2B||$648M|
|Peloton Interactive||Recreational Goods||$6.9B||$1.2B|
|Cloudflare||Network Management Software||$3.9B||$525M|
Notably missing from the list is WeWork. The company failed to go public due to profitability concerns, and anchor investor Softbank recently provided $9.5 billion in bailout financing in an attempt to rescue the company.
Sky High Valuations
As venture capital reaches new heights, analysts will be paying closer attention to each startup’s profitability potential.
“… new companies are shifting their focus to measured growth in an effort to prioritize long-term success and a more sustainable, scalable business model.”
–Alex Song, CEO and Co-Founder of Innovation Department
With 2019 coming to a close, will fourth quarter venture capital activity be able to maintain its present momentum?
Markets10 months ago
The Jeff Bezos Empire in One Giant Chart
Maps1 year ago
Mercator Misconceptions: Clever Map Shows the True Size of Countries
Advertising9 months ago
Meet Generation Z: The Newest Member to the Workforce
Misc12 months ago
24 Cognitive Biases That Are Warping Your Perception of Reality
Advertising8 months ago
How the Tech Giants Make Their Billions
Technology11 months ago
The 20 Internet Giants That Rule the Web
Chart of the Week10 months ago
Chart: The World’s Largest 10 Economies in 2030
Environment9 months ago
The World’s 25 Largest Lakes, Side by Side