Financial literacy has always been a challenge. However, now that much of the burden of retirement income has shifted to employees instead of employers, it is all the more important that we begin teaching the principles of saving and investing to people as early as possible.1
In a recent survey, 44 percent of Americans said they would rather discuss death, religion or politics than talk about personal finance with a loved one. The taboo attached to talking about money is apparently still alive and well.2 However, our circumstances have changed, and people from all demographics need to understand how to prepare for their future sooner rather than later. In particular, college graduates overcome with debt can quickly fall behind.
This longstanding taboo also contributes to the gender wage gap. Women are less likely than men to aggressively negotiate their starting salaries, and are more harshly judged when they do so; as a result, women remain behind the curve when it comes to saving and investing for retirement.3
It is not enough to simply provide basic financial education. We also must work against the taboo and make talking about money as mainstream as discussing sports scores. It’s never too early — much of the reason algebra and Shakespeare are sometimes lost on high school students is because they don’t have the life experience in which to apply mathematical principles or the language of love. As your children and grandchildren graduate and procure that first “real” job, we’d be happy to help them get started with an investment plan.
While some high schools have been proactive in teaching personal finance, only 17 states require high school students to take a personal finance class.4 However, studies have shown that the states that do mandate financial education produce students with higher credit scores and more responsible spending habits.5
Unfortunately, the U.S. ranks 14th in the world when it comes to understanding basic investment concepts such as diversification and compound interest. Furthermore, our young adults seem to be less interested (or less able) than previous generations in participating in the stock market. In the past two years, 37 percent of young adults — those younger than 35 — owned stocks compared with 52 percent before the 2008 market crash.6
Part of the problem with financial literacy is the language of investing — we need to “de-jargonize” terms and figure out how to explain things in a simpler way. For example, you might advise your millennial son to invest his 401(k) in an index fund, but he may not be familiar with those terms. It’s important to avoid jargon when possible and explain terms as you use them.7
At the beginning of this year, Congress introduced The Youth Financial Literacy Act designed to fund K-12 financial literacy programs and professional development for personal finance instruction. The draft legislation targets personal finance issues such as credit, student loans and financial aid for young people. The bill is still in the first stage of the legislative process and has yet to be voted on by the Senate Health, Education, Labor, and Pensions Committee, for potential referral to the full Senate. A previous version, introduced in December 2018 just two weeks before the end of the congressional session, never received a vote.8
Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, a Registered Investment Advisory firm.. Insurance products and services offered through B.O.S.S. Retirement Solutions. Marketing materials provided by Infinity Marketing Services.
1 Kathleen Burns Kingsbury. CNBC. April 30, 2019. “America is in a financial literacy crisis, and advisors can fix the problem.” https://www.cnbc.com/2019/04/30/the-us-is-in-a-financial-literacy-crisis-advisors-can-fix-the-problem.html. Accessed May 6, 2019.
4 Michelle Fox. CNBC. April 28, 2019. “Here’s how the super rich teach their kids about money.” https://www.cnbc.com/2019/04/26/heres-how-the-super-rich-teach-their-kids-about-money.html. Accessed May 6, 2019.
5 Daniel Thompson. Council for Economic Education. Feb. 8, 2019. “2018 Survey of the States Reveals Slow to No Growth in K-12 Personal Finance and Economic Education.” https://www.councilforeconed.org/2018/02/08/2018-survey-states-reveals-slow-no-growth-k-12-personal-finance-economic-education/. Accessed May 6, 2019.
6 Mark Stoeckle. CNBC. May 6, 2019. “Let’s all give our kids the gift of an investment.” https://www.cnbc.com/2019/05/01/lets-all-give-our-kids-the-gift-of-an-investment.html. Accessed May 6, 2019.
7 Knowledge@Wharton. May 1, 2019. “How Cash-strapped Millennials Can Take Control of Their Finances.” https://knowledge.wharton.upenn.edu/article/investing-for-millennials/. Accessed May 6, 2019.
8 GovTrack.us. 2019. “S. 155 – 116th Congress: Youth Financial Learning Act.” https://www.govtrack.us/congress/bills/116/s155. Accessed May 6, 2019.