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Middle Class Americans Acknowledge Financial Mistakes, Says Survey

A majority of middle-class Americans admit they have made at least one substan

A majority of middle-class Americans admit they have made at least one substantial financial mistake, according to analysis of a finance survey recently done by major financial services firm Primerica and the Consumer Federation of America (CFA).

In the report, called "The Financial Status and Decision-Making of the American Middle Class," two-thirds of participants reported that they had made at least very bad financial decision, with the average loss that resulted totaling $23,000.

Survey methods

The report was based on an analysis of survey data culled from 2015 representative adults who were polled by research firm ORC International as well as a statistical analysis of the Federal Reserve Board's 2010 Survey of Consumer Finances by Professor Catherine Montalto of The Ohio State University.

ORC International Survey

In the ORC International Survey, 843 of the 2015 respondents reported household incomes ranging between $30,000 and $100,000 and were categorized as being middle class. In the survey, two-thirds of these participants reported that they had made no less than one "really bad financial decision," and almost one-half, or 47 percent, indicated that they had made at least two bad decisions. The cost of these decisions averaged $23,000, while the median was $5,000.

The investing preferences stated indicated that this swath of the populace had higher risk aversion than people in higher income demographics. While 21 percent specified that they would invest primarily in "stocks, bonds, and/or mutual funds if given $1 million for retirement, 48 percent of individuals with income of $100,000 or more (higher-income people) indicated they would invest in these assets.

In terms of making financial decisions, the largest fraction, or 45 percent of respondents, indicated that they would seek outside help from a financial professional, compared to 17 percent who indicated they would simply figure it out on their own and 15 percent who specified they would turn to television, the internet or books.

"Considering their past mistakes and the complexity of the financial services marketplace, we were surprised at how highly most middle class Americans rate their ability to make a variety of financial decisions and how infrequently they rely on information from the Internet and publications," CFA executive director Stephen Brobeck said in the statement.

A recent survey conducted by the U.S. Securities and Exchange Commission revealed that a substantial fraction of retail investors lack financial literacy, in that they know little about stocks or bonds.