'Financial Illiteracy' Cost Americans an Average of $1,819 in 2022 — Here Are The Most Common Mistakes People Make Luxury spending, overdraft fees, and identity theft are some of the most common (and costly) ways to lose money.

By Madeline Garfinkle

Opinions expressed by Entrepreneur contributors are their own.

kate_sept2004 | Getty Images

A recent survey by the National Financial Educators Council found that in 2022 financial illiteracy cost Americans an average of $1,819 per person. It's the largest number in the six-year history of the survey.

The survey is based on the average losses reported by 83,000 survey respondents in 50 states. Individuals were asked how much money they thought they lost due to a lack of knowledge about personal finances.

The increase in losses for 2022 could be attributed to record-high inflation and other recent economic challenges, but there are several common mistakes individuals make every year that can cost people thousands. Here's a look at four.

1. Credit card interest and fees

According to the Consumer Financial Protection Bureau (CFPB), the most common and costly financial illiteracy mistake made annually is due to credit card interest and fees, which costs Americans nearly $120 billion each year.

To avoid fees and accruing interest, the National Financial Educators Council recommends doing a simple credit card interest calculation to assess how much you should be paying monthly. For example, let's say you owe $3,000 on a credit card with an ARP of 25%:

Source: National Financial Educators Council

2. Luxury spending

Luxury spending is the second biggest cost to Americans, resulting in about $64.8 billion in spending in 2020, the report noted, per SaveMyCent.

From 2020 to 2022, the purchase of luxury goods increased in the U.S. by over 10 billion, according to Statista, and the category is expected to experience continued growth until 2028.

If you're looking to save or avoid overspending, the report suggests being conscious of marketing terms and images promoting "exclusivity." It's okay to want a new watch or handbag, but is it really in your budget to buy a Rolex or Chanel?

3. Overdraft fees

Overdraft fees are the third biggest financial illiteracy cost at an average of $17 billion annually, according to the CFPB. Although banks offer overdraft protection that allows purchases to go through even if the entire amount is not present in one's account, the results are damaging because the bank charges for the overdraft transaction.

While most overdraft transactions are incurred on purchases of $24 or less, the median overdraft fee is $34 according to the CFPB. It may not seem like a lot, but make it a habit, and those fees stack up quickly.

4. Identity theft and fraud

Other common (and costly) errors include identity theft and fraud, which cost Americans an annual average of $6.9 billion and $5.8 billion respectively, per data from the FBI and Statista.

While being a victim of identity theft and fraud can be out of our control, there are measures you can take to ensure your accounts and personal information is secure such as creating strong passwords, setting up alerts on accounts, and checking your credit reports regularly.

Madeline Garfinkle

News Writer

Madeline Garfinkle is a News Writer at Entrepreneur.com. She is a graduate from Syracuse University, and received an MFA from Columbia University. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

'I Love Doing Product Reviews': Bill Gates Stepped Down from Microsoft in 2020, But Admits He Still Spends 15% of His Time Working at the Company

In a new interview with the Wall Street Journal, Gates also said he is still close with Microsoft's CEO Satya Nadella.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Franchise

Franchise Models Explained — How to Choose the Right One for Your Goals

Navigating the franchise world starts with understanding key business models. Here's how project-based and subscription franchises differ in investment, scalability, and recession resistance.

Business News

Elon Musk's DOGE Is Hiring People Eager to 'Work Long Hours' to Eliminate 'Waste, Fraud and Abuse' in the Government. Here's How to Apply.

The Department of Government Efficiency is hiring U.S. citizens to help cut spending and headcounts in the federal government.

Business News

Uber's CEO Says Drivers Have About 10 Years Left Before They Will Be Replaced

Uber CEO Dara Khosrowshahi says the jobs of human drivers are safe for the next decade, but after that, another type of driver will take over.

Business News

'Everyone Can Profit From It': What Is DeepSeek? China's 'Cheap' to Make AI Chatbot Climbs to the Top of Apple, Google U.S. App Stores

DeepSeek researchers claim it was developed for less than $6 million, a contrast to the $100 million it takes U.S. tech startups to create AI.