Financial Capability in the United States: Consumer Decision-Making and the Role of Social Security

Published: 2010


This paper analyzes new data from the 2009 National Financial Capability Study. This survey provides information to assess how American households make financial decisions, how they are faring under current economic conditions, and in what ways financial knowledge contributes to financial capability. In addition, it includes data about the information that the Social Security Administration (SSA) provides to consumers. The paper finds that the majority of individuals do not plan for retirement or make provisions against shocks. Debt management often results in sizable interest payments and fees and it is notable how many individuals have used high-cost methods of borrowing in the past five years. Levels of financial knowledge are strikingly low and many respondents do not possess knowledge of basic concepts. Social Security has taken steps to provide information about what individuals will expect to receive when they retire. The self-reported evidence provided in the survey shows that the information has been used by about a quarter of the population who acknowledge receiving the statement. Moreover, there are large differences among use in demographic groups and some of the more vulnerable populations, such as African-Americans, those hit by shocks, and single and separated individuals are more likely to use the statement.

Key Findings

    • Financial capability is low among the U.S. population.
    • Financial literacy can be linked to retirement planning, making provisions against shocks, high-cost borrowing, and making ends meet.
    • A quarter of the population who acknowledged receiving the Social Security statement has used it to make decisions about when to stop working or when to claim Social Security benefits.
    • Some demographic groups, such as African-Americans, those hit by shocks and older Americans, are more likely to use the Social Security statement.