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Financial Literacy Leads to a Higher Quality of Life

By Jane Young, CFP, EA

This is an ideal time to enhance your financial knowledge because April was Financial Literacy Month. During the month of April, financial institutions and professionals have been filling social media and the internet with a wealth of information to improve your understanding of personal finances.

Being financially literate is having the knowledge, ability, and confidence to effectively manage your finances. This includes the ability to understand and apply your knowledge to budgeting, saving, debt management, investing, retirement planning, taxes, and risk management.

The ability to make and execute informed financial decisions results in greater monetary stability, less stress, and a higher quality of life. Financial literacy gives you control over your finances to make knowledgeable choices to achieve your life goals. When you feel empowered to manage your finances you are better able to navigate financial challenges and opportunities.

Unfortunately, according to FINRA, The Financial Industry Regulatory Authority, 66% of Americans are financially illiterate. To increase your financial security, confidence, and financial well-being, make an investment in your future and increase your financial literacy. According to Warren Buffett,” The best investment you can make, is an investment in yourself… The more you learn, the more you earn.”

Numerous studies have found a direct correlation between financial literacy and monetary stability. The American College of Financial Services 2023 Retirement Literacy Income Study found that many Americans between 50 and 75 lack actionable retirement knowledge - averaging only 31% on their retirement literacy quiz. The study found a direct relationship between financial literacy and asset levels. Respondents with $1.5 million in assets scored twice as high as those with less than $100,000.

 The study also found that those with greater confidence in their financial knowledge had saved more for retirement. They found confidence was one of the most significant indications of a positive retirement outcome and confidence increased with retirement income literacy.

Additionally, the study found that financial professionals provide an essential role in educating clients. Respondents who worked with an advisor had greater financial literacy and better outcomes than their peers. They found a compelling link between retirement literacy and working with a financial advisor. Working with an advisor resulted in increased confidence, and decreased stress and anxiety.