When it comes to education, we instinctively understand the link between performance and opportunity — a college graduate is likely to have more job opportunities than someone who didn’t finish high school. Similarly, the high school valedictorian may be courted by more colleges and universities than a poorly performing student. In fact, data from the Bureau of Labor Statistics shows that higher levels of literacy and more advanced education tend to correlate to positive outcomes in wage growth and job opportunities. Because we know the importance of education, we push ourselves and our children to learn and grow, in the hopes of better opportunities in the future.
But when it comes to financial literacy and financial wellness, we seem to lose sight of the connection, contenting ourselves with barely passing grades. In fact, more than half of Americans say they’d earn a “C” or lower if tested on their financial literacy, according to a new survey conducted by The Harris Poll on behalf of Prudential Financial.
Nearly three-quarters (73%) take responsibility for their own grade, according to the survey. Why don’t we change our behaviors and work to improve our knowledge of a topic we know to be so critical to our lives?
Information overload may be at fault. While the survey shows nearly half of American adults (46%) spend more than two hours on social media each week, fewer than one in five (17%) spend that much time managing their finances. In addition, two-thirds of Americans (66%) say the list of things they need to learn to successfully manage their finances keeps on growing, not shrinking.
“The financial industry as a whole needs to drive home the importance of financial education to help clear a path toward financial wellness,” said Caroline Feeney, head of Individual Solutions at Prudential. “It’s important for us to help Americans understand how to manage day-to-day finances, achieve important financial goals and protect against future financial risks.”
Previous data from Prudential’s Financial Wellness Census shows more than a quarter of Americans (29%) have a skewed sense of their financial health, with many optimistic about their financial future despite objective measures showing them falling behind in achieving their financial goals. In fact, the Census data showed less than half of Americans are on track to meet their goals, including planning for retirement.
The challenge, then, is how to translate retirement uncertainty and financial insecurity into actions that help build financial wellness before and into retirement. That’s where financial literacy programs and professional financial advice can play a key role.
Today, people can access advice along the spectrum, from self-directed methods to hybrid advisors who serve as coaches to full-service, high-touch advice. “Our lifelong personal financial wellness journeys often require a combination of smart solutions, good advice and guidance about appropriate investment tools or products,” says Feeney.
Planning is critical to meeting financial goals (whether it’s buying a car or a house, paying for college or planning for retirement), so it’s important to find the method that works best for you. Life stage and personal preference will play a role in determining your path to financial wellness, but financial education, professional guidance and access to the right products and investments at the right stage of the journey are key components of the financial wellness journey.