Here’s What Americans Know About Their Money (And What They Need To Learn To Build Wealth)
English philosopher and statesman Francis Bacon said, “Knowledge is power.” American President Andrew Jackson said, “Money is power.”
So, who was right? As it turns out, they both might have been onto something.
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A new GOBankingRates survey of more than 1,000 adults found a direct connection between financial literacy and financial security — and people need to empower themselves with the former before they can achieve the latter.
Learning Your Way Out of the Financial Wilderness
The study revealed good news. More than 4 in 10 respondents said they haven’t struggled with money due to a lack of financial literacy. While that leaves more than half who have, the even better news is that education can right a sinking money ship — 1 in 5 said they struggled in the past but have since recovered now that they have a better understanding of money.
However, that leaves 36% still mired in monetary instability because of their lack of financial literacy.
COVID-19 Was a Wakeup Call, but Bad Habits Are Hard To Unlearn
Nearly 3 in 4 people said they’ve become smarter about money since the pandemic, and while it’s good that COVID-19 wrested the masses out of their financial literacy slumber, many are struggling to overcome bad habits they developed long before 2020.
As with anything, financial lessons picked up in childhood can be hard to undo later in life, and many respondents adopted unfortunate attitudes toward money as kids.
More than 1 in 3 said bad money habits became ingrained when they were minors, including not prioritizing saving or building an emergency fund, overspending on credit cards, failing to budget and impulse shopping. Smaller but still considerable percentages remember learning it was OK to pay bills late, pay only the minimum credit card balance, live beyond their means or cave into lifestyle inflation while failing to invest.
Early adulthood can pave the wrong path, too. Respondents in strikingly similar percentages reported learning the same bad money habits as young adults, and in many cases, those same bad habits negatively impacted their marriages and romantic partnerships.
Unsurprisingly, many say they’re worried about passing the same bad habits onto their own children.
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The Big 3: Debt, Retirement Planning and Investing
Debt is one of the primary inhibitors of financial success, and the study shows that many people have a lot to learn about how to avoid it, manage it, eliminate it and use it to their advantage.
The largest share, about 30%, is most confused about how to save money while paying off debt, while a little less than 1 in 4 need to learn more about the quickest way to pay theirs down and not accumulate more while they work to eliminate their existing burden.
When it comes to investing, 37% — the largest share by far — want to learn how much they’ll need to retire comfortably. Meanwhile, 23% need more information on the best type of account to grow their money — IRAs, 401(k) plans, traditional savings accounts, etc. Smaller but still significant percentages need to learn more about employer retirement benefits and how to access professional advice.
Finally, there is a lack of financial literacy regarding investing. The largest plurality says that investing is a great way to build wealth, but nearly 1 in 4 say it’s way too risky, 1 in 5 don’t know how to get started and around 13% think it’s too expensive.
People Are Thinking About Money — but Will They Start Learning About It?
The study showed that nearly everyone has money on their minds, with 44% saying managing their finances is all they think about. More than 1 in 3 say they think about it often and nearly 1 in 5 say they give it only the occasional thought.
While nearly half — about 46% — say they find it easy to manage their money, a similar percentage find it difficult. One in 10 say they simply don’t know where to start.
The best advice is to start by learning, but with so much conflicting information available and so many pretenders posing as experts, where can people turn for unbiased and actionable insight into how to manage their money, build wealth and secure their financial futures?
Start Small To Avoid Feeling Overwhelmed
Those who say they don’t know where to start reveal one of the biggest obstacles to financial literacy. With so much to learn, and so many potential sources of information and misinformation, pursuing knowledge can be intimidating and overwhelming — but you don’t need to master it all at once.
“My advice to people who want to become financially literate would be to start with the basics,” said certified financial planner Matt Schuberg, founder and CEO of the financial management site Planned. “Learn about the different types of bank accounts, how to create a budget and how your credit score works. This will provide a strong foundation and the confidence to continue learning.”
In a World Where Everyone’s an Influencer, Sources Matter
Even if you’re seeking out only the most primary information on the basics of financial management, you’ll be bombarded with promises from self-proclaimed gurus who claim that you, too, can pay off five-figure debt, buy a home and start a business in 30 days — as long as you subscribe to their channel or buy their e-book.
“When it comes to sourcing information, be discerning,” said Danielle K. Roberts, co-founder of Boomer Benefits and a member of the Forbes Finance Council. “Look for credible sources backed by reputable institutions or recognized experts in the field. Be wary of sensationalized claims or get-rich-quick schemes. Remember, if something sounds too good to be true, it probably is.”
Maintain a Critical Eye, but Keep Your Mind Open
That doesn’t mean you should rule out any format or platform where good information might be hiding.
“While I don’t advocate following any random TikTok ‘influencer’ to improve financial literacy, I do acknowledge that people learn in different ways,” said Paul Carlson, CPA, managing partner of Law Firm Velocity, a firm specializing in CFO and bookkeeping services for law firms. “Reading books, listening to top-rated podcasts or watching videos from accredited hosts, or taking online or in-person courses are all effective when the method of delivery resonates with the preferences of the learner.”
Roberts agrees.
“Different formats suit different learning styles, so explore various mediums to find what resonates with you,” she said. “Financial publications can provide in-depth analysis and market insights, while podcasts offer a more conversational approach to financial topics. Social media influencers and celebrity money gurus can offer valuable perspectives, but always cross-reference their advice with other credible sources.”
Like Saving Money, the Sooner You Start Learning, the Better
Learning about money is a lot like saving it. Both deliver compounding returns by building on previous gains — and the best time to start both was yesterday.
“Becoming financially literate is key to enabling your success,” Schuberg said. “Even if you plan to hire someone for help, it’s important to understand financial concepts so you can better determine who has your best interests in mind.”
The keys are starting small, sticking with it and not getting too caught up in results.
“Navigating the vast world of finance can indeed be daunting for those looking to become financially literate,” Roberts said. “The first step is acknowledging that financial literacy is a journey, not a destination. It’s OK to feel overwhelmed initially, but persistence and commitment will pay dividends in the long run.”
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This article originally appeared on GOBankingRates.com: Here’s What Americans Know About Their Money (And What They Need To Learn To Build Wealth)
