If you were to do a quick web search on the topic of financial literacy in the US, the results should be concerning. Multiple studies show the percentage of the population that feels financially literate can be between 20-40%. This means between 60-80% of the population considers financial discussions difficult.

What can be done to improve this number?

A starting point would be asking the question, how do people think about money? Money is different to each person. Some people are able to embrace money and make money work for the benefit of them; these would be the people who feel financially literate. The rest are intimidated by money and want nothing to do with it. Add in the constant barrage of advertising and marketing from the financial industry and media and people can get confused.

A foundation needs to be established to learn the basics of all things financial. It would include education about investing, banking, real estate and insurance. This would help build financial literacy and cause more people to embrace financial education. The result would be the ability to make a more informed decision when in discussion with a financial salesperson.

My experience working with businesses regarding their employee retirement plans led to a revelation; most employees do not have the education to make informed decisions for the allocation of their retirement dollars. Amazingly, most participants’ allocation in a company sponsored plan is made from recommendations from other employees. Further, the optimal amount to contribute is based on how it will impact current cash flow received after taxes from a paycheck.

During annual plan enrollment meetings some educational materials are distributed regarding the benefits of participating in the plan and basic information about investment concepts but usually not much more is provided. The employee has the responsibility to educate themselves. Resulting in a listless effort being made on decisions that can have an impact on future returns and earning potential.

There has to be more done and it must start as soon as possible. Education can’t be delayed when more and more people are becoming responsible for their financial well-being and governments are making adjustments to the retirement benefit offerings.

These 2 recent announcements will impact current individuals receiving retirement benefits and demonstrate the need for earlier and more improved financial education.

First in the United States:

Approximately 70 million Americans will see a 8.7% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2023. On average, Social Security benefits will increase by more than $140 per month starting in January. (source: Social Security Administration)

Second in the United Kingdom

Fast forward to today when in a dramatic reversal, we learn that the UK is sinking into Greek-style austerity: the Telegraph reports that Prime Minister Rishi Sunak and finance minister Jeremy Hunt plan to reveal a stealth tax raid on pensions later this month. The pension lifetime allowance is set to be frozen for two more years, with a rise in line with prices delayed from 2025 to 2027, the newspaper said. (Source: Reuters)

Both announcements should be concerning for the current generation receiving these benefits and future generations that are not yet entitled to these benefits. The cost of living will continue to grow resulting in a challenge to manage not only current expenses but future expenses. How would both of these announcements be handled by individuals who have invested in financial education to make better informed decisions?

Learning how to manage all financial matters can seem intimidating BUT it must be embraced by the populace. Relying on institutions whose sole purpose is to generate profits from the sale of financial products while providing limited financial education must end. Instead of continuing to pay for financial services that include a sales pitch wrapped as education, one should be paying to receive unbiased financial education that will aid in making informed decisions.

Breaking the change is designed to help individuals break from the cultural norms ingrained by financial institutions to change financial behavior and seek out competent financial guidance. Breaking the change does not offer financial advice but provides real world experience from several decades in the financial industry. The goal is to educate and inform the public as they work on their financial affairs.

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