Americans are increasingly responsible for their own financial security after retirement. Fixed payout pensions have largely given way to 401(k)s. This transition brings new opportunities and challenges. It also is another reason why financial literacy and education is more important than ever.
Studies show many American workers are not well-prepared to manage their finances. One study found nearly half of the older workers interviewed didn’t understand the type of pension or retirement plan they had and a large majority knew little about basic rules relating to Social Security benefits.
The need to better understand personal finances doesn’t just begin as workers approach retirement. Financial skills matter throughout life as people consider questions such as the affordability of owning a home or how to best prepare for funding their children’s education. Financial literacy is also needed to avoid financial exploitation.
It is often said that the first step towards solving a problem is admitting the problem exists. Americans know we need to improve financial literacy. The National Foundation for Credit Counseling Financial Literacy Survey recently revealed that 41 percent of adults gave themselves a grade of C, D or F on their knowledge of personal finance and 61 percent admitted to not having a budget.
Financial literacy is one of the highest priorities for the Financial Services Roundtable and our member companies. Making progress is a shared responsibility of the private sector, government, and consumers.
FSR and our member companies work to provide financial literacy resources and support to help educate and inform consumers.
Examples of such efforts include Bank of America partnering with the nonprofit Khan Academy to offer “Better Money Habits,” an online resource that offers videos on financial literacy topics such as understanding credit, home buying, saving and budgeting. U.S. Bank has created a “Credit Wellness Center” that helps consumers take control of their credit score by highlighting tips about how to protect and maintain good credit scores. And State Farm Insurance’s “Make It Possible Program” hosts “A Slice of L.I.F.E.™” financial education workshops for underserved young adults, covering topics including the home buying process, the importance of credit, buying a car and establishing financial goals. More information efforts to improve financial literacy by FSR member companies is available at our Corporate Social Responsibility website, or by downloading a copy of FSR’s 2014 Impact Report.
Financial literacy is an important part of avoiding financial mistakes and planning for a strong, secure financial future. FSR and our member companies continue to raise awareness and support for enhanced financial literacy during Financial Literacy Month and every month.
Source:Lusardi, Annamaria (2007): Household saving behavior: The role of literacy, information and financial education programs, CFS Working Paper, No. 2007/28.