A lot of us pride ourselves on our knowledge of the world around us. We think we’ve got a pretty good handle on things and it’s the other guys who screw up. But a new report from the Securities and Exchange Commission seems to say, when it comes to how we handle our money, too many people who think they know what they’re doing financially really have no idea. Because of that, in some ways, we’ve contributed to some of our own national economic problems.

The S-E-C report is called the “Study Regarding Financial Literacy Among Investors.” I’ve long believed – based on an awful lot of evidence – far too many Americans know too little about how their own government works. Now, it seems, a whole lot of us don’t really know much about our financial affairs, either.

The gently worded bottom line of the S-E-C report: “Regular investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid financial fraud.” Further, quoting directly, “Women, African-Americans, the oldest segment of the elderly…have an even greater lack of investment knowledge than the average general population.”

After the economy hit the ditch in 2008, the S-E-C theorized too many of us put our dollars in investments without having even the basic knowledge to really be sure of what we were doing. So, the theory was the recession hit a lot of us harder than it would have otherwise had we had been smarter with our money. This prompted the agency to contact some online research outfits, run numerous focus groups and even involve the Library of Congress.

Evidence gathered was overwhelming. While a lot of people thought they were pretty smart, too many didn’t understand the risks of investments they bought into or know much about who they gave their money to. Even some who thought of themselves as literate about money affairs couldn’t calculate fees or understand compensation disclosures in mutual fund and other investments. They handed over their bucks but didn’t really know a lot of details. Many who thought they knew couldn’t calculate hourly fees and other costs based with the value of their managed assets. A large majority even confessed to not reading the prospectuses describing what was happening to their nest eggs, claiming they couldn’t figure them out.

While many interviewed gave themselves high marks for financial knowledge, they still took actions that hurt their financial health. Things like overdrawing checking accounts, incurring unnecessary bank fees, being behind on credit card and other monthly financial obligations and failing to maintain sufficient cash for emergencies.

Only half of the thousands interviewed had any sort of retirement plan and a majority of them had never calculated what they really needed to have on hand when they quit working. They also didn’t understand the risks of buying individual stocks versus mutual funds.

As for financial education, in 2011, just 22 states required high school classes in economics and only 14 required courses in personal finance. But – and this is a key finding – the report said “While the 2011 survey shows there’s clearly been progress (in financial knowledge) over the last survey in 1998, in the last two years the trend is slowing and in some cases moving backwards.”

Some investors – without doing their own research – found themselves hit by financial scammers. Some bad guys could be those who passed enough exams to get a license but were short on the honesty and good business practices consumers took for granted they should have. Others just got a phone number and a post office box. Without even rudimentary knowledge of who they were giving their dollars to – and how those dollars would be handled – many folks found they should have read the fine print or gotten a second financial opinion. Can you say anything connected to the words “Wall Street” with the same confidence you used to?

Civic illiteracy is far too prevalent in this country. In current political campaigns – where lies and damned lies are being passed off as truths – a lot of folks are confused and many more are too accepting. They lack the necessary understanding of government structure, the court system, the specific roles of the legislative, executive and judicial branches, the facts of what is really behind our failed congress and other knowledge of government necessary to cast informed ballots.

Now, with the new S-E-C report in hand, it seems a whole lot of us are equally uninformed of the basics of our financial affairs – both national and personal.

Widespread ignorance of national civic and financial realities – it appears here is sufficient proof of both. Maintaining strength in two of the most important underpinnings of our democracy requires better understanding by each citizen. Where will it come from? And when?

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