W hen it comes to understanding financial literature and terminology, confusion reigns.
Of the 1,203 adults we surveyed, 54% percent said they do not read financial literature because it's "too hard to understand." And despite the general consensus that healthcare information is confusing, 79% found mutual fund literature and prospectuses more difficult to understand than the literature from their health insurer.
Many Americans are also perplexed by terms commonly used by the financial
services industry. Less than a third of respondents said they understood the terms "basis point," "expense ratio" and "index fund" well enough to accurately explain them to a friend or co-worker.
It's not surprising, then, that 50% of those surveyed say they are "not so or not at all knowledgeable" about investing and 72% wish they had a better understanding of financial terms.
Unfortunately, this confusion often leads to a lack of confidence when selecting investments. In fact, respondents were more confident in their ability to select the right surgeon for a major operation than they are in their ability to choose the right investments.
The bottom line? Just 19% of respondents were very confident that we will have enough money to live comfortably through retirement.
| "Which is easier to understand?" | |
|---|---|
| Mutual fund prospectus Instructions for your computer |
23% 69% |
| Mutual fund prospectus IRA tax forms |
33% 58% |
| Mutual fund prospectus Your car insurance policy |
13% 82% |
| Mutual fund prospectus Inserts that come in prescription drugs |
16% 79% |
|
Responses may not total 100% due to respondents who did not answer the question or said "don't know". Source: AARP Financial Inc., 2008. |
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