By                    Yaёl Bizouati-Kennedy

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A Look at Financial Education

The survey found that a staggering 95% of Americans believe high schools are lacking in financial education. However, it did also find that 80% of Americans consider themselves financially literate. As for where Americans are getting their financial education, only 26% said their literacy comes from high school classes, 22% said from parents and family, 21% from college classes, and 18% from social media and websites. In comparison, a meager 7% said it stems from a financial advisor.

In addition to issues with obtaining a financial education, there’s also the matter of what this education should cover — especially when it comes to retirement planning, which can get very complex.

“Pensions are valuable but increasingly rare. How much time should be spent educating people on pensions?” Motola said. “401(k) [plans] are more common, but how much you’re actually able to rely on them is at the mercy of market fluctuations. How much of an education in the stock market are we giving the average person? How smart is keeping your money in a savings account when inflation exceeds interest rates? What are the risks and opportunities from holding assets? To what degree will retirees be able to rely on Social Security by the time they retire?”

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Many Americans Lack a Retirement Plan

In terms of starting to save and plan for retirement, nearly a quarter — 23% — of Americans say they haven’t started. The lion’s share of nonplanners goes to the 26- to 35-year-old age bracket, according to the survey.

In addition, the survey points to a striking gender gap, as 29% of women say they haven’t started planning, compared to 17% of men.

The findings are in line with those of Fidelity Investments’ 2022 State of Retirement Planning Study, which finds that while 79% of Americans express confidence they’ll be able to retire when and how they want, 1 in 4 also say they are now less confident than they were before the events of the past two years. In addition, 71% of Americans say they are very concerned about the impact of inflation on retirement preparedness, and 31% don’t know how to make sure their retirement savings keep up.

Taking Matters Into Your Own Hands

It’s never too late to start planning (or re-planning), whether you put your retirement plans on pause during the pandemic or cashed out. If you feel overwhelmed about saving for retirement, it’s important to keep in mind you don’t have to do it all at once.

“It’s a big, scary concept. It’s overwhelming to think about meeting all of today’s financial needs while also putting money aside for this big abstract goal in the future,” Rossman said. “Also, financial education is generally lacking in schools — fewer than half of states require personal finance classes — and a lot of our friends and families aren’t the best resources either. Many people end up learning money lessons through real-life experiences — the school of hard knocks, if you will — or from financial advisors, books or websites.”

Rossman explained that it’s important to take matters into your own hands and educate yourself about money and that a really powerful lesson is the impact of starting early. If your investments gain 10% a year — the approximate historical average of the S&P 500 — $1 today will become $45 in 40 years, he said. 

“This is what you’re doing when you’re setting money aside in your 20s and accessing it in retirement. A Roth IRA or Roth 401(k) can be especially meaningful for younger people because they can pay taxes now when they’re presumably in a lower tax bracket than their higher earning years later in their careers. And then withdrawals are tax-free,” Rossman added. “So in summary, the best lesson is to start early. Pick a diversified index fund with low fees that tracks a broad index such as the S&P 500 and keep adding to it, and you could be amazed at how much money accumulates over time.”

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