The Financial Industry Regulatory Authority (FINRA), a private American corporation that self-regulates financial institutions, found in its 2025 National Financial Capability Study that 64% of Americans think they have a high level of financial knowledge.
But are Americans as good with money as they think they are?
The Confidence Gap: When Self-Perception Meets Reality
Despite the confidence Americans expressed in their financial savvy, they are, as a whole, engaging in more and more risky financial behavior. The study finds, for example, that since 2021, the number of people who claim to always pay their credit card bill in full each month decreased by six percentage points.
Additionally, the number of Americans who claimed to carry a balance on their card and merely paid the minimum payment each month increased relative to 2021. Overall, 59% of credit card holders engaged in at least one financial faux pas that would lead to either higher interest on their cards or higher fees. Forty-one percent of holders engaged in two or more.
Why Smart People Make Expensive Financial Mistakes
The issue with self-perception is that people think any level of intelligence will automatically translate into the financial realm. But that’s not always the case.
“Finance is a skill that needs to be studied and learned. Many intelligent people have a vast knowledge base, but many have not been educated on the topic of money,” says Lawrence Sprung, founder and wealth advisor at Mitlin Financial. “Having an increased knowledge base can lead these individuals into a false sense of security, leading them to take on additional risks.”
Dr. Carolyn McClanahan, president and founder of Life Planning Partners, agrees: “Smart people are the worst. Many doctors fall victim to this. They think that because they’ve gotten through medical school, they can do better than professionals in many other areas of their lives.”
Warning Signs You’re Overestimating Your Money Skills
How can you tell if you’re one of those Americans who think they’re better with money than they actually are? According to Marguerita Cheng, founder and CEO of Blue Ocean Global Wealth, you should start with the numbers.
“Some warning signs include increasing levels of debt and decreasing levels of emergency funds,” she says. Sprung agrees that debt is a good place to start: “Credit balances increasing over time could be an indicator that you may be making money mistakes.”
“If you think you have a good enough knowledge base and see debt beginning to mount, this may be your cue to look to hire someone to help educate you in the area of credit and financial basics,” he adds.
How to Bridge the Gap Between Confidence and Competence
How can you bring your self-perceptions in line with reality? For starters, make sure you’re educating yourself on a variety of financial topics. “Be in tune with your money scripts, what you have been taught, and what you know. You do not need to know everything, but it is advisable to have a basic knowledge base,” says Sprung.
But he stresses that this shouldn’t make you cocky: “You also need to know when you may be over your skis and speaking with a professional may be helpful.”
Additionally, McClanahan says you should be vigilant about your finances. “Many people subconsciously know that life can change at any moment, and a significant number of those people translate that underlying thought to their spending habits. So, although they are smart, they sometimes just don’t care. They may become lazy in managing debt or saving for the future,” she says.
And finally, make sure you’re talking about your finances with your loved ones—and with certified financial advisors. “Sharing your concerns and fears with others who don’t judge you can help improve financial confidence. This can include peers, friends, mentors, family, or professional advisors,” says Cheng. She adds that talking about finances with others can help people overcome shame and guilt from past poor financial decisions.
The Bottom Line
Most Americans think they’re financially savvy, but the numbers tell a different story. While many people are smart and capable in other aspects of life, they erroneously think that will transfer into their wallets and portfolios. But this is not the case.
If your debt is rising and your savings are dwindling, you may be one of these Americans. If you think you’re overestimating your financial skills, there is a way to align your self-perception with reality: via educating yourself, staying vigilant about your finances, and talking about your finances with loved ones and trusted advisors.