Only 45% of the middle class would seek financial advice for complex decisions, yet two-thirds have made at least one “really bad financial decision” – costing them thousands.
These are the findings of a recent study from our friends in the USA at the Consumer Federation of America.
The federation’s report found that most middle class respondents rate their ability as “excellent” or “good” to make decisions on a wide variety of financial issues, while 63% rated highly their ability to save for retirement, and 66% rated highly their ability to purchase life insurance (66%).
Additionally, a “surprisingly high” percentage of respondents said they “wouldn’t seek any information or advice, and just make a decision,” said the report.
“The percentages who said they would use information and advice from a financial professional tended to be higher for the relatively complex decisions about saving and investing (45%) and purchasing a mortgage loan (35%) though lower for purchasing life insurance (24%), managing credit card debt (18%), and purchasing auto insurance (13%),” it added.
Other findings included:
40% said they would not seek information or advice in managing credit card debt.
24% would not seek information or advice in purchasing life insurance.
17% said they would not seek information or advice in saving and investing.
16% said they would use mainly information on the internet or in publications to manage credit card debt.
17% said they would use mainly information on the internet or in publications to purchase life insurance.
15% said they would use mainly information on the internet or in publications for saving and investing.
Despite the middle class’ reluctance to seek professional advice when it comes to their finances, the report noted that 67% of respondents admitted that they had made at least one “really bad financial decision”. Furthermore, 47% acknowledged that they had made more than one of these bad decisions.
In terms of the losses made through making bad investment decisions, the mean average response was $23,000. Interestingly, the median response was far lower at $5,000, and the report put this differential down to the severe losses that some respondents had suffered.
“Eleven per cent said their losses had been at least $50,000, and two per cent said these losses had been $200,000 or more,” said the report.