#financialeducation

By:  Henry VanBuskirk, CFP®, Wealth Manager

New parents in any country all share a common goal – to have their kids be better off than they were.  In America, we colloquially call it ‘The American Dream’. In some respects, the dream is alive and well. In others (budgeting, debt management, and financial literacy in general) it looks more like ‘The American Nightmare’. My goal today is not to pontificate on the efficacy of the recent federal student loan forgiveness plan or recommend we should do X, Y or Z politically (there are plenty of talking heads that do that for us already). My goal is to tell it like it is and have you come to your own conclusions. 

The reality is that the United States is 14^th in the world in financial literacy with 57% of adults being considered financially literate, according to the S&P Global Financial Literacy Survey. Fifteen-year-olds generally score average when it comes to financial literacy, and it also isn’t surprising to hear that socioeconomic factors play a role in how well a respondent answers the financial literacy questions. 

My definition of financial literacy is having a basic understanding of budgeting, saving, investing, and debt management. You may be wondering what kind of questions were asked in this survey and may be surprised when you read them that the questions asked were not trick questions, nor were they at the level of a post-graduate managerial economics class’s final exam.  Here were some of the questions asked (correct answers are in red):

With all of the talk about inflation on the news, it’s concerning that 43% of the United States does not understand why having high inflation for too long is a problem in the long term. This begs the question, “How do we get more Americans to become financially literate?”. Adults may want to start reading multiple peer-reviewed sources online to learn the basics on their own and to learn when to ask for help. A good place to start would be our financial literacy webinar series that we did:

• Connecting the Dots to Your Financial Future (Part 1)
• Connecting the Dots to Your Financial Future (Part 2)
• Retirement Plan Basics

We have a robust library of free educational content at BFSG University where you can watch additional webinars, use different calculators (such as mortgage calculators, loan calculators, and savings calculators), and read our other past blog posts. There is also an abundance of free educational content today outside of BFSG if you would like to teach yourself too. Some great websites to get you started are:

• NerdWallet: https://www.nerdwallet.com/
• Bankrate: https://www.bankrate.com/
• Investopedia: https://www.investopedia.com/ 

That solves the problem for current adults, but it doesn’t necessarily get to the root of the problem. It would be most beneficial to start learning these topics in our youth. More than half of the states in America do not require a high school course in personal finance to be taken, require coursework integrated with another course, or do not even include personal finance as part of the state standard.

I know Americans are accustomed to seeing a map of the United States shaded in different colors and automatically roll their eyes and think “oh boy, here comes the political argument”. Fortunately for you, I don’t have one.  I believe that wanting future generations of Americans to be able to answer questions to real-world problems like, “(1) Should I only pay the minimum required balance on my credit card, or should I pay it off in full every month? (2) Should I contribute to my 401(k) at work and if so, how much should I contribute? (3) Should I buy a home or continue to rent?” is not a political argument.  I will say that if your local school system does not require personal finance education, please do your best to teach your kids or grandkids yourself. 

I would like to illustrate how this can be done through my financial literacy journey.

My Story:

While I don’t claim to be the omniscient financial guru, I like to think that I am at least financially literate. My journey probably started like most kids. I grew up in the 90s and I had an allowance of $5 per week. My allowance was given to me if I mowed the lawn, took out the trash, cleaned the dishes, cared for our family dog, and didn’t get into any trouble at school. With that $5, I usually bought candy or junk food, nothing worthwhile. I would do the chores weekly, and my dad would usually “forget” to pay me my $5. One time when I was 8, I did my chores for 6 weeks straight and my dad still didn’t pay me for my 6 weeks of work (no I didn’t get in trouble at school). My dad told me to go mow the lawn and I told him, “What’s the point.  You haven’t paid me for 6 weeks and you owe me $30. Why would I continue to do work if I don’t know if I’ll get paid or not”. My dad then gave me $30 and said, “What do you want to buy?”.  I told him I wanted to buy a $30 video game and my dad then drove me to Best Buy so I could go buy it. After I bought the video game (that I still have more than 20 years later), and got home and started playing it, I realized that I could get things I wanted if I saved my allowance money. A couple of years later, I found out about the stock market and learned that my money can make me money without me having to do anything (except for having a well-thought-out investing process). That journey then led me to the career that I’m in today.

Our team at BFSG is here to help you teach the next generation in your family how to be financially literate and to invest and save for future generations. 

Sources:

1. https://www.councilforeconed.org/wp-content/uploads/2022/03/2022-SURVEY-OF-THE-STATES.pdf
2. https://www.yahoo.com/video/financial-literacy-around-world-top-120017481.html
3. https://milkeninstitute.org/sites/default/files/2021-08/Financial%20Literacy%20in%20the%20United%20States.pdf
4. https://www.investopedia.com/the-push-to-make-financial-literacy-into-law-4628372
5. https://www.investopedia.com/articles/investing/100615/why-financial-literacy-and-education-so-important.asp

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

We concluded our Summer Webinar Series in August of 2022. We had a great turnout and thank you to our clients and friends that joined us live. The educational series covered great topics such as planning for loved ones, retirement plan basics, behavioral investing, Social Security and Medicare. We hope you learned something new to help you achieve your retirement goals.

For those that were unable to attend or for those that want to re-listen to the webinars, the replays are now available at BFSG University on YouTube. We always suggest you subscribe to BFSG University on YouTube to ensure you never miss the latest educational videos and presentations, many of which are pre-recorded and not broadcast via live webinar.

Again, we hope you enjoyed our summer webinar series and we look forward to having you back for future sessions. 

Caring for your aging loved ones can be challenging—especially if you are unfamiliar with all the unique challenges and obstacles that come with elder care. Fortunately, BFSG is here to help.

On July 19th at 10 AM PDT, we will discuss the ins and outs of elder care and outline your options with special guest John Clark of Pathfinder Senior Care Consulting.

Register today for this important discussion!

The “It’s Your Money!” financial literacy workshop series is back. Sign up for free to attend the virtual Zoom sessions covering the business of the financial service industry. BFSG is a proud supporter of the It’s Your Money and Estate series. Peter Kote and the team put together another great line-up of speakers.

Register here: https://us02web.zoom.us/webinar/register/WN_pa2s2pBhRjKJlqIfLG-BDA

4/07: Overview & Tax Changes with Delia Fernandez

4/14: Financial Planning I with Laurie Dubchansky

4/21: Medical Care Planning with Kari Buist-Baker

4/28: Investment World with Paul Horn and Michael Allbee

5/05: Equity & Fixed Income Investing with Mark Wilson

5/12: Financial Planning II with Laura Tarbox

Everyone wants financial security. But women often face unique obstacles that can affect their ability to achieve it. Let’s look at some of these potential headwinds.

Women have longer life expectancies. Women, on average, live 5 years longer than men (1). A longer life expectancy presents several financial challenges for women:

• Women will need to stretch their retirement dollars further;
• Women are more likely to need some type of long-term care, and may have to face some of their healthcare needs alone; and
• Married women are likely to outlive their husbands, which means they could have ultimate responsibility for the disposition of the marital estate.

Women generally earn less and have fewer savings. According to the Bureau of Labor Statistics (2), within most occupational categories, women who work full-time, year-round, earn only 81% (on average) of what men earn. This wage gap can significantly impact women’s overall savings, Social Security retirement benefits, and retirement savings.

The dilemma is that while women generally earn less than men, they need those dollars to last longer due to a longer life expectancy. With smaller financial cushions, women are more vulnerable to unexpected economic obstacles, such as a job loss, divorce, or single parenthood.

Women are more likely to be caregivers. Statistics show that the majority of caregivers are women (3). Of the more than 40 million Americans serving as caregivers to their loved ones, 60% are women and that number has increased during the global pandemic. Often times being a caregiver means having to work part-time or leave the workforce. Over time, being a caregiver can have significant financial implications, such as,

• Loss of income, employer-provided health insurance, retirement benefits, and other employee benefits;
• Less savings;
• Potentially lower Social Security retirement benefits;
• Difficulty with career advancement or reentering the workforce; and
• Increased financial vulnerability in the event of divorce or death of a spouse.

Women are more likely to be living on their own. Whether through choice, divorce, or the death of a spouse, more women are living on their own. This means they’ll need to take sole responsibility for protecting their income and making financial decisions.

Women need to protect their assets. As women continue to earn money, become the main breadwinners for their families, and run their own businesses, it’s vital that they take steps to protect their assets, both personal and business. Without an asset protection plan, a woman’s wealth is vulnerable to taxes, lawsuits, accidents, and other financial risks that are part of everyday life. But women may be too busy handling their day-to-day responsibilities to take the time to implement an appropriate plan.

Steps women can take

Today, women have more financial responsibility for themselves and their families. So it’s critical that women know how to save, invest, and plan for the future. Here are some things women can do:

• Take control of your money. Create a budget, manage debt and credit wisely, set and prioritize financial goals, and implement a savings and investment strategy to meet those goals.
• Become a knowledgeable investor. Learn basic investing concepts, such as asset classes, risk tolerance, time horizon, diversification, inflation, the role of various financial vehicles like 401(k)s and IRAs, and the role of income, growth, and safety investments in a portfolio. Look for investing opportunities in the purchasing decisions you make every day.
• Plan for retirement. Save as much as you can for retirement. Estimate how much money you’ll need in retirement, and how much you can expect from your savings, Social Security, and/or an employer retirement plan. Understand how your Social Security benefit amount will change depending on the age you retire, and how years spent out of the workforce might affect the amount you receive. At retirement, make sure you understand your retirement plan distribution options, and review your portfolio regularly. Also, factor the cost of health care (including long-term care) into your retirement planning, and understand the basic rules of Medicare.
• Advocate for yourself in the workplace. Have confidence in your work ability and advocate for your worth in the workplace by researching salary ranges, negotiating your starting salary, seeking highly visible job assignments, networking, and asking for raises and promotions. In addition, keep an eye out for new career opportunities, entrepreneurial ventures, and/or ways to grow your business.
• Seek help to balance work and family. If you have children and work outside the home, investigate and negotiate flexible work arrangements that may allow you to keep working, and make sure your spouse is equally invested in household and child-related responsibilities. If you stay at home to care for children, keep your skills updated to the extent possible in case you return to the workforce, and stay involved in household financial decision making. If you’re caring for aging parents, ask adult siblings or family members for help, and seek outside services and support groups that can offer you a respite and help you cope with stress.
• Protect your assets. Identify potential risk exposure and implement strategies to reduce that exposure. For example, life and disability insurance is vital to protect your ability to earn an income and/or care for your family in the event of disability or death. In some cases, more sophisticated strategies, such as other legal entities or trusts, may be needed.
• Create an estate plan. To ensure that your personal and financial wishes will be carried out in the event of your incapacity or death, consider executing basic estate planning documents, such as a will, trust, durable power of attorney, and health-care proxy.

It is important for women to educate themselves about finances, make financial decisions, seek professional help when needed, and implement plans to ensure that they and their families will have financially secure lives.

Sources

1. NCHS Data Brief, Number 355, January 2020
2. U.S. Bureau of Labor Statistics, Highlights of women’s earnings in 2018, Report 1083, November 2019
3. AARP, The Trickle Down Effect of Caregiving on Women, November 2018

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.