Financial Literacy – When is it Effective?

MON, APR 23rd, 2018
For the fourteenth year in a row April has been designated financial literacy month, a time when proclamations are issued, online self-help quizzes and tools are highlighted and we are encouraged to become more literate about our personal financial situations.

Financial security boils down to a few key tenets: Spend less than you earn, build a reserve fund for unexpected contingencies, avoid debt, and save and invest diligently for the future. Pretty simple, right? Why then do we have an ongoing crisis as families nationwide struggle with their finances? Turns out most financial struggles are not all about self-indulgence or an inability to resist temptation. The biggest cause of financial woes is medical debt.

The Burden of Medical Debt

According to the Kaiser Family Foundation 25% of U.S. adults struggle with medical bills—and it’s not just the uninsured. Health care bills are the number one cause of personal bankruptcy filings and such debt impacts 40% of adults nationwide. Per the New York Times, in 2016 20% of Americans under age 65 with health insurance had trouble paying medical bills, of these 63% used most or all of their savings to pay down health care costs and 42% took on an additional job to pay the bills.

Most American households do not have the financial resilience to withstand a health care shock. A GoBankingRates survey indicated 69% of us have less than $1,000 in savings and 34% of us have no savings at all. These households struggle to come up with $500 to fix the car to get to work; never mind the thousands of dollars in bills even a minor health issue can create. And while several studies indicate personal finance high school and college level courses have no discernible impact on behavior there is plenty of room to be optimistic.

Personalized Financial Advice Makes a Difference

Two people were out for their morning walk when they noticed thousands of starfish washed up on the beach. One of them bent down picked one up, and threw it back in the ocean. “Why did you do that?” asked the friend. “You’ll never make a difference.” “I made a difference for that one,” he replied.

Guiding people to successful financial lives is a lot like throwing starfish back in the water. Programs that attempt to broadly create financial literacy and good financial behavior have a mixed record at best. However one-on-one advice—when the advice seeking individual or family is ready to accept it—has a great track record of making a positive difference.

“Just-in-time” learning has a demonstrable positive impact. For example, when a new hire is schooled on the tax advantages and long-term wealth building potential of the company 401(k) as part of the onboarding process she is far more likely to participate in the plan. When a financial advisor works with a young couple to help them create a budget, improve their credit score, and build an emergency reserve in order to achieve their goal of home ownership the couple is receptive to changing behaviors.

Don’t Struggle with Your Finances Alone

While solving the health care challenge, the underemployment of many, and the skills gap between available careers and skill sets of job seekers is way beyond the scope of this missive, we can circle back to the basics of a successful financial life and can continue to look for “just-in-time” opportunities to share these lessons with our loved ones and anyone else willing to listen.

Spend less than you earn, build a reserve fund for unexpected contingencies, avoid debt, and save and invest diligently for the future. For help in doing just this, please reach out to me or any one of Albion Financial Group’s Senior Wealth Advisors at (801) 487-3700.


John Bird, CFA®, CFP®, MBA / President, Principal and Co-Founder
Albion Financial Group
(801) 487-3700

About Albion Financial

Established in 1982, Albion Financial Group is an independent, fee-only financial planner and investment manager located in Salt Lake City, Utah.