Category – Money and Banking/Polls & Research/Survey 2020

Perceptions and Understanding of Money 2020 — A note from Marco Streng

Last year we set out to understand how well American’s understood money with our Perceptions of Money and Banking 2019 Report. 

Did they know what the US dollar was backed by? Did they understand fractional banking? Our results weren’t all that surprising. Many didn’t understand the basics of how our financial system worked. Our intention of doing this study wasn’t just to prove people didn’t understand money — it was to set a benchmark report that would be measured year over year. 

A lot has happened over the past year. To say 2020 has been eventful would be an understatement. Governments across the world have fired up their money printers and are pumping money into their economies to keep them afloat. 

To find out how the average American’s views toward money and our financial system have evolved over the past year, we surveyed 400 Americans on July 28, 2020 and asked them a series of 22 questions. 

Our findings are divided up into four parts: 

Part 1: Understanding of the Financial System 

Part 2: Trust of Financial Institutions 

Part 3: Beliefs about Money 

Part 4: Bitcoin and Cryptocurrencies

Part 1: Understanding of the Financial System 

We interact with banking and financial systems every day to ensure that our earnings are being protected, our investments are growing, and that we have easy access to cash when we need it.

Yet many American’s are unaware of how our financial system actually works. What is the Federal Reserve and how does it act to influence monetary policy that directly affects Americans? What is the gold standard and why should we be aware of it? How much cash does your bank keep on hand?

These may seem like questions we don’t need to pay attention to, so long as the balance in our bank account is correct. But knowing these answers — or not knowing them — shows how much we understand how one of the most important systems in our nation works.

Here’s what we found.

What is the US dollar backed by?

One dollar is one dollar of what? Beginning in 1879, the United States adopted the gold standard, which meant that one dollar was backed by one dollar’s worth of gold. But in the early years of the Great Depression, President Roosevelt adjusted the gold standard in order to ease the economy. The price of gold remained steady only until 1971, when President Nixon completely suspended the gold standard, meaning that the US dollar was no longer backed by gold.

But how many Americans are aware of this history? Our survey revealed that most people aren’t quite sure.

42% answered that it’s backed by the US Government, which is up from 30% last year. But 28.5% said it was backed by gold, which is about the same percentage as our survey last year — which we now know is incorrect — and the remaining 30% answered that they thought it was backed by either oil, bonds, or nothing, or they just didn’t know.

We then asked, “Who is responsible for creating more US dollars?”

We then asked who is responsible for creating more money. About 60% of our respondents knew that the Federal Reserve, which is considered the nation’s central bank, is able to create more money and inject it into our economy, and is responsible for the overall money supply. They don’t do this by printing money, but by buying up securities, with the purchase money going back into the economy.

The remaining 40% of our respondents, however, weren’t sure, with a quarter of respondents believing it to be the US Mint (who simply makes coins in response to policy demand). 6.8% said they didn’t know.

“Who owns Federal Reserve banks?”

In 1913, President Wilson signed the Federal Reserve Act to establish a national central bank. While considered both a public and private entity, the Federal Reserve’s board reports directly to Congress, while its twelve banks function more like corporations and operate relatively decentralized. 

We asked our respondents if they knew who owns the Federal Reserve banks, and 61.3% said the government does, while 19.3% responded that it was a partnership between corporations and the government, which is a bit up from last year. 13.3% responded that they didn’t know.

We asked respondents, “Does your bank need to hold the exact amount of money that customers deposit at all times?”

More than half — 63.7% — responded that no, your bank does not need to hold the exact amount of money at all times, which is correct. Banks tend to only keep enough cash in their vaults to anticipate their transaction needs. Otherwise, banks will use the cash behind your deposits to loan to others or invest (remember the scene in It’s a Wonderful Life?). Yet 36% of our respondents incorrectly believe that yes, banks hold all cash amounts in their vault at all times.

For those that said no, we asked what percentage of customer cash deposits do they need to hold in reserves? 

Up until March 2020, banks with less than $16 million eligible deposits didn’t need to hold any cash in reserve; banks between $16 and $122.3 million needed to reserve 3%; and banks at $122.3 million or above needed to hold 10% in reserve. But as of March 2020, due to COVID-19 concerns, the minimum reserve number was reduced to 0% for all banks regardless of the amount of eligible deposits.

45% of our respondents didn’t know how much needed to be in reserve, with 13% answering “1-10%,” which would cover the rate up until March 2020. The remaining 42% chose rates much higher than needed.

Part 2: Trust of Financial Institutions 

Even with our collective historical knowledge of the bank runs that precluded the Great Depression, financial institutions causing the bottoming-out of our economy in 2008, and the new recession caused by COVID-19, we found that our respondents had a good amount of trust in their banks. Still, is it trust or a false sense of security?

We asked our respondents if they trust their bank.

77% of our respondents replied that yes, they do trust their bank. Only 1.5% strongly disagreed.

When we asked more specifics, we found that an even higher percentage — 84% — agree that they trust their bank to keep their money secure, with only 1.3% saying they strongly believed it wouldn’t.

What about personal information? Again, 79% of our respondents believed that yes, they trust their bank to keep their personal information secure.

But who do you trust more?

When we compared banks to other societal and cultural institutions, we found that our respondents still had a lot of confidence in their banking institutions.

Respondents trust banks more than they trust police…

…much more than they trust Congress…

…much more than they trust the media…

…and even more than they trust lawyers.

We then asked, “Which banks do you associate the most with trust?”

Of the banks we asked about, Bank of America, Chase, and Capital One were the major banks most associated with trust. (Though a high percentage of our respondents answered “I don’t know.”)

When it came to who our respondents trusted the least, the majority answered Wells Fargo, with good reason: In 2016 news broke that millions of fraudulent accounts were created by Wells Fargo employees under customer names, without customer consent. Even though the criminal charges were recently settled with the SEC, the bank essentially marred its reputation — as our survey showed.

Part 3: Beliefs about Money 

Because money is such an important part of our lives, we took a look at some beliefs about money, specifically in regards to inflation. Inflation concerns the decreased buying power a dollar has. We know inflation happens in the US because a loaf of bread fifty years ago cost a fraction of what it does today — it’s not the loaf of bread that’s changed, but the buying power of our money. Yet while we’re accustomed to a steady 3% inflation rate in this country, we hear stories about countries where the money to buy a chicken outweighs the chicken, and how trillion dollar notes are barely worth anything. That couldn’t happen here, right?

What are your views on inflation?

Maybe inflation is more of a concern than we might think — especially in 2020. 88.6% of our respondents were concerned about inflation, split between Somewhat Concerned at 53.3% and 35.3% saying they’re Very Concerned.

Of those respondents, nearly half — 46.8% — indicated that their concerns about inflation had increased over the past year. This is most likely due to one of the biggest hits to our economy in recent history: COVID-19. Has the global pandemic lead not only to fears about employment and the economy, but to an increase in fear that the dollar is going to lose buying power? Yes.

We also asked if the US government added additional money to stimulate the economy due to COVID-19, with 73% saying yes, and it has. Not only has the Federal government provided stimulus checks, the Federal Reserve has injected trillions of dollars into the economy and exacted other monetary policies to keep everything afloat. But such policies could — as our respondents maybe sense — lead to higher levels of inflation.

The future of cash

Even though we talk about how “Cash is king” and “It’s all about the Benjamins,” we have to acknowledge that most of the transactions we do today are digital, from swiping a card, having automatic deposits or withdrawals from our bank accounts, tapping our phone to a POS system, Venmo-ing our friend, or linking a PayPal account online. 

Still, 26.8% of our respondents believe that in 100 years, our society will still be using physical cash. Another 25% stated they weren’t sure, leaving just a bit less than half our respondents believing that in a century, we’d be in a cashless society. All things point to us moving in that direction already.

When we asked whether the US government should replace physical currency with a digital-only dollar, only 24.8% said “Yes,” with more than half our respondents saying “No.” In other words, despite our increasing reliance on monetary payments and exchanges being only numbers online, there’s still a high level of dependence, confidence, and trust in physical currency.

But there’s a different story here when looking at our answers to this question from last year. In 2019, only 13.3% of respondents said yes, a digital dollar should replace physical currency. In just a year, the number of people saying “Yes” nearly doubled. The number of respondents answering “No” decreased, from 76.2% to only 60%, and the number of “I don’t know” went from 10.5% to 15.3% — possibly indicating uncertainty, but possibly indicating an increased openness to a digital dollar.

Part 4: Bitcoin and Cryptocurrencies  

Cryptocurrency was designed as a decentralized system of currency not under the control of any government or banking system, that is 100% digital, and inflation-proof. Since we surveyed our group about their concerns around inflation and what they thought about the possibility of a digital dollar, we also wanted to get a pulse check on how our respondents view Bitcoin and cryptocurrencies. 

Have you heard…?

In the documentary Life on Bitcoin, a newly-married couple attempts to live for one hundred days on Bitcoin and, in 2013 when they filmed it, most people they encountered never heard of cryptocurrency. In 2020, 87.3% of our respondents have heard of either Bitcoin specifically or cryptocurrency in general, which indicates an incredibly widespread awareness — which is the first hurdle to getting the word out about a new product or technology.

When asked what their thoughts were regarding Bitcoin and cryptocurrency, the largest response at 35% was that it’s an “interesting idea that may have potential but too early to tell” — even though Bitcoin was created in 2008. Still, 17% of respondents were open to learning more about it, and 15.5% believed cryptocurrency would in fact someday replace the US dollar. While there were responses that felt negatively about cryptocurrency, they fell into the lower percentiles, meaning that while awareness is increasing, understanding around the potential and benefits of Bitcoin and cryptocurrency is increasing as well.


As Liza Minnelli sang in the musical Cabaret, “Money makes the world go ‘round.” And whether it be clocking in to earn a paycheck, buying our morning coffee, making an online purchase, or putting a down payment on a house, our interactions with money are daily, if not hourly. 

Yet while we’ve found that a segment of Americans do understand how our financial systems and intuitions work, the majority either have the wrong information about it or, as seen with our high level of “I don’t know” responses, simply don’t have any knowledge about it.

But this isn’t disheartening at all. It just shows us that there’s a great opportunity to educate others about where their money comes from and where it goes, how banking systems work, and how Bitcoin and cryptocurrency can play a major role in elevating and advancing our usage of money going forward. 

Want to download this report as a PDF? Here you go: GM_MONEY_REPORT_2020

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