Americans are behind much of the developed world in their understanding of personal finance.
The gap in knowledge has led the U.S. to be ranked 14th globally in terms of financial literacy, according to the Personal Finance Employee Education Fund.
According to the PFEEF research, the U.S. has a 57% literacy rate, beating out countries like Botswana (52%), but falling short when compared to Germany (66%) and Canada (68%).
Americans are not getting the financial education needed to be financially knowledgeable adults. Just 16.4% of U.S. students are required to take a personal finance class in school.
The lack of necessity in personal finance classes has led generations to grow up with very little real-world knowledge of money and finances. In fact, 76% of millennials lack basic financial knowledge.
These statistics may be disheartening, but advisors can play a key role in educating others about the importance of personal finance matters.
Ways Advisors Can Help
- Get Involved – “As financial advisors, we can volunteer for Junior Achievement or the Girl Scouts. The Girl Scouts have a personal finance badge,” said Marguerita Cheng, financial planner and CEO of Blue Ocean Global Wealth. “We can speak at career days. We need to make our message age-appropriate and relevant. For those schools that do have financial literacy requirements, letting the schools know you can help teach a lesson to support/enhance the learning experience goes a long way.”
- Advocate – With the help of industry organizations and associations, a few advisors advocating for a cause can turn into many.
“Over the past few years I have worked with the SIFMA foundation because they partner up with local high schools to promote financial literacy,” said Ryan Marshall, a financial planner with ELA Financial Group in Wyckoff, N.J. “I find it to be really meaningful for both myself and the students. Throughout the years I have run into students who I have spoken with and they are very thankful that I introduced them to financial planning in high school. They say they are better prepared than some co-workers because they were already introduced to retirement plans and basic investments. It has been a truly rewarding experience.”
Kittye Tilford, co-chair of the Pro Bono Committee of the Financial Planning Association of Colorado, says doing local events as part of the FPA has helped boost financial literacy in Denver. “Each year we partner with Junior Achievement to help students understand the importance of money management,” she said. “We also host Financial Planning Day. This is a free event that is open to the public. We have workshops covering various topics such as Social Security, Medicare, Money Management, etc. We also have Certified Financial Planner Professionals on hand for one-on-one counseling.”
- Educate Clients, Family & Friends – Other advisors are taking the approach of passing on resources available to them to their clients through their firm and the financial planning process.
Ashley Folkes, senior vice president of investments at Moors & Cabot in Phoenix said, “We have a focus on educating on the front end, and throughout our relationship together. We spend a ton of time at creating, understanding and then implementing the financial plan. Most of the initial learning takes place during this process,” said Folkes. “We engage in a number of areas, digging deeper on the areas that they feel weak in. this initial education creates awareness first of all so they can be empowered to make better, more confident financial decisions. “
Folkes’ firm offers clients financial education outside of the office, as well. “We have a whole separate coaching service that does onsite education programs, one on one coaching, orientation coaching, retirement readiness coaching,” he said. “We also have the ability to partner with an online literacy company and our job will be to facilitate the learning and implementation.”
- Open A Dialogue – Any dialogue is better than no dialogue, Cheng said: “My friend Kathleen Burns Kingsbury says that we need to break money silence. Not talking about money only makes matters worse. It’s important to use everyday situations as learning experiences.”
Karen Voorhis is a financial planner from Norwell, Mass. She agreed with Cheng and Kingsburg, adding that talking about finances as often as possible and as early as possible with children is a critical part of helping kids grow up to be financially literate adults.
“We have to start talking to our kids freely about money,” Voorhis said. “I have three kids and we speak openly and freely to them about our incomes, our mortgage, how much we have saved how much life insurance we have, etc. They have seen our tax returns. This is the best way to learn, hands down, and I'm tired of parents not teaching kids anything about the way the world works. We just perpetuate the problem, if we don't start talking about it.”
- Pass On Resources – In addition to educating clients when they come into the office, advisors are sharing educational opportunities via the power of the internet. Making clients aware of online resources, educational opportunities they can do at home and where to find answers to frequently asked questions can be a game changer says Jon Baker, a financial advisor from Atlanta.
“Over the last five years we have developed a program directed specifically at this issue,” he said. “We call it Next Gen U. It is a series of five interactive courses that are put online and can be accessed by our clients’ family members. These courses cover the fundamentals of budgeting, being a smart consumer, investments, insurance and tax planning and even introduce estate planning basics.”
Next Gen U is made available to clients and their family members with the specific goal of improving financial literacy.
“Our goal is to keep improving these educational opportunities and potentially be able to package it up in a technology stack that could stand alone for other advisors or organizations,” Baker said.
Other advisors recommend personal finance books to educate their kids and their clients.
Jan Valecka of Valecka Wealth Management in Dallas, said, “There is a book called The Official Money Guide for Teens and I had my kids read the small chapters last summer then I would quiz them on what they read – bank accounts, overdraft protection, cybercrime, interest rates on credit cards, FICO and why that matters.”
AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.
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