A new article from PLANSPONSOR takes a deep dive into the historic American challenge: financial literacy. Quoting stats from Questis’ newest white paper, “So Many Courses, So Little Progress: Why Financial Education Doesn’t Work — And What Does,” John Manganaro explores the financial literacy epidemic in the U.S. and what can be done to improve it. Here’s an excerpt from the article:
A new analysis published by Martha Brown Menard, who conducts financial services user experience research for Questis, dissects both successful and unsuccessful financial education programs, with an aim at discovering what approaches work best in what circumstances.
Setting the stage for her recommendations, Menard suggests financial stress among U.S. employees is reaching “epidemic proportions.” She cites survey data to the effect that 75% or more live paycheck to paycheck, personal savings rates are at their lowest since 2007, and non-mortgage debt levels are higher now than during the Great Recession.
The analysis goes on to suggest that behavioral psychology can be helpful in understanding this failure in education. Menard suggests those who receive financial education often fail to act because they are discounting the potential of future suffering, feeling overconfident about their future ability to take corrective action and worrying about potential losses. These are the same symptoms that cripple people from making better decisions across all facets of life, independent of their level of awareness on a given topic/challenge.
Menard’s analysis concludes that the lessons of behavioral finance are only just being absorbed into the domain of financial education—and she expects that over time the efficacy of educational programming could finally (and dramatically) improve. In the most simplistic terms, she says financial education “must be easy, by removing barriers or reducing friction; attractive, by offering the right incentive; social, by promoting a sense of positive belonging; and timely, by linking it to a current situation and an individual outlook.”
To read the full article “Lack of Financial Literacy Remains Historic American Challenge” by John Manganaro, click here.