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Americans are way too confident about their finances, study finds

Americans say they feel good about their finances, but nearly two-thirds spend money each month without a budget, and more than one in five say they are spending more than they did last year, according to the NFCC and NerdWallet's 2015 FInancial Literacy Survey. 

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    A woman counts her US dollar bills at a money changer in Jakarta. Nearly 70 percent of Americans said they are currently worried about their finances, according to NerdWallet and the NFCC's 2015 Financial Literacy Study.
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Americans say they feel good about their finances, but many aren’t actually doing what they should to make sure their financial future is bright.

Those are findings based on the National Foundation for Credit Counseling’s (NFCC) 2015 Financial Literacy Survey. The survey was released this week by NerdWallet and the NFCC.

Among the survey’s more than 2,000 adult respondents, 92% said they are either very or somewhat confident in their most recent big financial decision, such as picking a credit card, buying a car or financing a home.

Nearly two out of three (59%) said they deserve an “A” or “B” for their financial knowledge.

But, at the same time, nearly 70% said they are currently worried about their finances. A full 60% said they spend money each month without a budget, and more than one in five (21%) say they are spending more than they did in 2014.

While 57% of Americans are saving for their retirement and 66% maintain non-retirement savings, 28% of Americans are worried that they do not have enough savings.

Student-loan debt emerged as a particularly prickly problem for many respondents.

Among those currently repaying student debt for themselves or their children, most (58%) said they’re unable to set up emergency or retirement savings accounts or buy a car because of the financial commitment to the loans. Only 6% who took out student loans felt they were a good investment, and more respondents said they would advise against student loans (11%) than would recommend them (7%).

“Many Americans are spending their adult lives slowly chipping away at a mountain of student loan debt only to find themselves approaching retirement later in life with little or no savings,”said Susan C. Keating, president and CEO of the NFCC. “The stakes are too high for consumers to let misplaced confidence get in the way of sound financial decisions.”

There were some rays of hope in respondents’ answers about credit-card management.

While one in three households carry credit card balances from month to month, the percentage with balances below $2,500 increased by 4 percentage points over last year. The number of those who pay off their balances each month remained steady at 49%, while about one in four respondents (24%) admitted to not paying their bills on time.

Still, though, the confidence respondents displayed didn’t always match up with their habits.

“These findings portray a bigger picture of the financial literacy knowledge Americans lack today,” said Cliff Goldstein, a personal finance analyst for NerdWallet. “When we asked respondents where they save or invest their money, we were shocked to find out that although 65% of Americans use a savings account, less than three in 10 use potentially higher-yielding investment vehicles such as a 401(k) (29%) or IRA (25%).”

In its ninth year, the Financial Literacy Survey measures the American consumer’s level of knowledge as it relates to financial literacy, as well as trends associated with personal finance behavior.

This year, it was conducted online from March 11 to 13, among 2,017 adults. Figures for age, sex, race or ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the U.S. population.

Doug Gross is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @doug_gross and on Google+.

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

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