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Financial Literacy Month, which came to a close on Tuesday, was a reminder of multiple issues, including the point that states and municipalities should implement stronger financial education in schools. Owing to the fact that such education is lacking in many states, many children grow up to be adults that aren’t highly knowledgeable about investing, personal finance or both.
Going forward, the lack of financial education available in public schools in this country must be addressed. As it pertains to younger generations, data confirm there’s an appetite for more financial knowledge and it’s not just investing tips clients are after.
Likewise, other data points indicate adults that lack adequate financial knowledge are cognizant of that situation, want to take steps to ameliorate it and are open to working with advisors to get there. That’s a good thing because financial literacy currently hovers around 50% among U.S. adults, indicating there’s ample room for improvement.
Improving Financial Literacy Is Vital
There’s substantial value in bolstering financial. The World Economic Forum’s Future of Global Fintech Research Initiative is examining solutions for accomplishing that objective and none too soon because the recent reading of the P-Fin Index, which gauges knowledge of eight essential financial concepts, wasn’t encouraging.
“Data from the 2024 index reveals how financial literacy in the US has hovered around 50% for eight consecutive years, with a 2% drop in the past two years,” according to the World Economic Forum (WEF).
Underscoring the importance of improving financial literacy in expeditious fashion is the point that many American adults surveyed by the WEF don’t understand basic concepts such as how interest on cash instruments works. From that, it can be inferred that many folks aren’t knowledgeable about how interest is calculated on auto loans, credit cards and mortgages.
Add to that, many adults don’t properly understand risk, indicating they might be biting off more than they can chew with their investment portfolios. That practically screams there’s a need for advisors.
“The world of money is changing significantly, so knowing how to benefit from financial markets while avoiding risk is very important. Yet, results from the P-Fin Index show that people’s comprehension of risk in the US has fallen further behind, sliding by 4% since 2017, to just 35% this year,” adds the WEF. “This is a far-reaching problem, as not being alert to financial risk appears to span generations.”
Retirement Fluency Needs Improving, Too
Perhaps not surprisingly, retirement is part of the lack of financial literacy equation with the WEF survey confirming the majority of American adults queried need education on important issues such as Medicare, retirement income and Social Security.
Throw in the point that people are living longer and the need for advisors grows. So does the need for financial education. Fortunately, there are playbooks the U.S. can follow to improve on this front.
“The P-Fin Index recommends financial education in primary and secondary schools. Denmark already has mandatory financial education for students ages 13-15, covering budgeting, saving, banking, consumer rights and more, while the UK has incorporated it into its national curriculum. These efforts are paying off: Denmark and the UK rank first and sixth, respectively, in financial literacy worldwide, according to Standard & Poor’s Ratings Services Global Survey,” concludes the WEF.
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