One of the reasons Americans struggle with financial literacy is that most people speak the wrong language.

Financial literacy is defined as the knowledge of how to make intelligent decisions with money. “Smart decisions” can include managing a budget and understanding savings accounts. That is important, but financial literacy often gets tripped up when it comes to investments. Indeed, a lack of understanding is usually the root cause of economic illiteracy, leading to destructive behaviors and debt-causing decisions.

You would never speculate or gamble with your hard-earned money, right? Of course not. Unfortunately, because so many often unqualified “influencers” promote get-rich schemes, we are essentially teaching people across generations that they can predict the future and make millions from risky investments in areas such as cryptocurrencies. You can’t. The key to financial literacy and financial education starts with an understanding that you don’t need to make predictions to grow wealth.

It Starts with Our Youth   

In my younger days, the educational focus was on the 3Rs—reading, writing, and ‘rithmetic; I think we need to refocus on that and ensure that the ‘rithmetic includes financial education.

Americans have long struggled with financial literacy, and despite the growth in investment, banking, and budget apps, the problem is only getting worse. According to a recent National Financial Educators Council study, its latest National Financial Literacy Test results show that teens ages 15-18 scored an average of 64%, with less than half passing. This highlights a significant gap in financial literacy among teens, as many scores fell below the passing score of 70%. The low pass rate highlights ongoing issues in teaching financial skills to youngsters.

I find it absurd that today’s education system prioritizes subjects such as algebra over life-changing skills like personal finance. It's high time we make it mandatory for all American youth to learn essential financial skills such as budgeting and understanding investments. The failure to address this issue is expediating our financial illiteracy problem, leaving young people unable to understand the volatilities of today's economy. Economic success isn't just about stock market gains; it starts with understanding how to manage money wisely and avoiding debt pitfalls. It's time to prioritize skills that empower individuals to make informed financial decisions.

Financial Literacy Is Lifelong  

In a time of economic uncertainty, the Biden administration's policies have only exacerbated the challenges facing American families. With inflation running rampant and the economy showing signs of slowing down, many Americans are struggling to make ends meet. The administration's heavy-handed approach to fiscal policy has only worsened the situation, leaving many Americans feeling the pinch.

Most of America is financially illiterate at a time when financial literacy is more important than ever before. Everyone has to file an annual income tax return with the IRS, but some people fear doing so. And since pensions for all practical purposes no longer exist, we are all on our own to figure out how to fund retirement. Even if Social Security stays as an option, the payouts aren’t enough for most people to live on.

Americans are drowning in debt because credit has been easy to get, and too many people don’t understand finances. American credit balances are spiking to more than $1.08 trillion, an amount that is compounded by the rise in college costs and students graduating with thousands of dollars in debt, with high interest rates that will take decades to pay off.

Changing the Language

The most important point regarding financial literacy is that it takes a commitment to lifelong learning. Even professional financial advisors often forget this.

Investors should always seek guidance from a trusted financial advisor who can provide personalized insights, customized investing strategies, and continued support. By working with a knowledgeable advisor, investors can gain the confidence and expertise needed to make informed decisions and secure their financial futures.

A person’s financial goals are fueled by their ambitions, history, and purpose for money. We are blessed to live in a country with free markets, but to keep them free, we need to be aware of how we interact with money and our goals. Financial literacy, defined by our purpose for money, is a great place to start.
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Ed Cofrancesco is Chief Executive Officer and President of International Assets Advisory (IAA). Founded in 1982, IAA sought to bring international exposure to retail investors, a revolutionary idea at the time. IAA’s goals is to excel as a relationship-driven, comprehensive financial services platform. Ed and his team work closely with IAA’s advisors & institutions, to offer the very best choices of products and services.