Best Practices: Linking Financial Literacy with Financial Experience
Here’s something we think: it’s hard to have very good financial literacy without some financial experience.
Until you have a financial account, the financial system will probably be a mystery to you
Until you have investments, they are probably going to be quite mysterious too
That may sound a little chicken and egg.
We advise people to become expert before they invest. And candidly, that’s a bit unrealistic. It’s pretty hard for me to hone my knowledge about something with which I have no experience.
By the way, you can also have financial experience but for a host of reasons, not be growing your financial literacy.
Automatic enrollment in emergency and financial savings gives us both a starting point and good middle ground.
I don’t have to know much to be automatically enrolled in retirement savings. All I need to know is that I want to have savings.
But if my knowledge stays in that place, I’m missing out.
The good news is that once I have an account I have some skin in the game and a reason to be curious.
I’m a saver – will my savings rate meet my needs – what do I need to consider
I’m investing – what are the first things I should know
My account is growing – how can I become an even more proficient investor and saver
I have a nest egg, how should I think about managing financial and family risk
My family are coming to me with financial questions – where do I get more information
I want to retire soon – how does this savings fit into my planning and readiness
Interestingly, our US financial system works well to get someone automatically saving. It works well when they proactively reach out and if they’re good at online search. But there’s a gap between those two where it’s possible that nothing is happening: no true information delivery, and no true knowledge growth.
So we’ve got a question for our Auto IRA leaders, and a question for the industry. With a host of new savers in public and private retirement programs now in position:
How do we link financial account experience to well considered financial learning opportunities
What are the best tools – bite sized, relevant, timely, personal, impactful
Can we demonstrate the impact of experience-linked financial learning
And what excellent examples do we have to learn from together?
We’re always asking for your input.
Drop us a line and share your thoughts. It’s time for more visibility here.
Retirement Security Matters.
Lisa
This piece was also featured in the September 21, 2023, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.
