Tough Times Underscore Need

Financial literacy shortcomings that have plagued Americans for decades are presenting even greater challenges during the COVID-19 pandemic and resulting economic slowdown.

Double-digit unemployment and economic disruption are forcing millions of families to adjust their budgets for reduced incomes and an uncertain future. Only 30 percent of U.S. households have a long-term financial plan, according to a recent Gallup poll, although 24 percent do use professional financial planners.

A spring 2020 survey by the National Endowment for Financial Education found that 88 percent of Americans reported the COVID-19 crisis is causing them personal financial stress. The study showed 54 percent of respondents were worried about not saving enough, while 48 percent were concerned, they would not be able to pay their bills.

During this global pandemic, Americans have also become increasingly aware of the need to receive expert financial guidance, according to the National Foundation for Credit Counseling’s 2020 Financial Literary Survey. NFCS reported that 78 percent of Americans agreed they could benefit from a financial professional’s advice and guidance.

Amping up education efforts

Lack of financial literacy is an issue for people of all ages, several financial advisors told Advisors Magazine. As financial planners stay in touch with clients to answer questions and modify their strategies as needed, they also use the downturn to help them educate their customers.

Most recent educational efforts have largely focused on young adults. However, several studies indicate the pressing need for better financial knowledge across the board – from millennials to baby boomers to the elderly.

Still, the educational need among young adults remains high. Another NEFE study found 69 percent of millennials believe they are financially literate. However, only 24 percent could pass a 15-question test demonstrating basic financial literacy – and only eight percent showed a high level of knowledge.

“Financial literacy among our teenagers and young adults has been steadily decreasing over the last few decades,” said Edward Sokolowski CLU®, ChFC®, AIF®, managing partner and financial advisor at Pioneer Valley Financial Group in Ludlow, Massachusetts.


Sokolowski said his firm partners with such organizations as Junior Achievement on financial education, as well as discussing financial literacy in the classroom. They cover such topics as balancing a checkbook and explaining the difference between a debit card and a credit card.

“By showing the next generation first-hand the importance of sound financial decision-making, we can hopefully bridge the gap of knowledge that will keep our economy growing and our children financially strong,” he added.

Robert Kloss, JD CFP®, founder and president of ClearPlan Financial in Orchard Park, New York, said financial literacy allows young adults to make informed decisions. The knowledge and skills acquired then contribute to the overall financial well-being of the next generation of leaders, employees, employers, and business owners.

“Without educated, responsible citizens who are employed and save for retirement and other financial goals, more government financial resources and social programs will be consumed,” Koss said. “Also, contributions to some of these programs come from payroll deductions and employer funding. Financial literacy indirectly benefits the support, funding, awareness, and usage of these safety net programs.”

Brian Fry, CFP®, of Safe Landing Financial in Austin, Texas, added, “Developing financial literacy at a younger age is more important than ever. Our financial marketplace offers tons of complicated choices. With limited help from the government, and with the average life expectancy increasing, it’s important to start somewhere and save appropriately.”

During the financial planning process, Fry said, he listens to what is most important to his clients. Then he builds a financial plan with actionable steps to help them achieve their goals.

“It’s important to educate my clients along the way to give better financial peace of mind,” he added, “and to illustrate how the recommendations will help achieve their short-term and long-term financial goals.”

Savvy seniors? Not always.

Older Americans are also lacking in financial literacy, despite their lifetime experiences. According to the American Society on Aging, surveys in the United States and seven other industrialized countries found elderly respondents consistently ranked lowest for financial knowledge among all age groups. Only one-third of older Americans responding to a three-question survey covering basic financial concepts were able to answer all the questions correctly.

Organizations and individual planners have begun addressing the specific needs of the older generation. For example, the National Council on Aging has developed its set of Savvy Saving Seniors® tools for financial education. The council’s materials and workshops cover such topics as how to create and follow a budget; avoid scams; manage pre-paid debit cards; and apply for government benefits.

As an elder law attorney, Yale S. Hauptman of Hauptman & Hauptman P.C. in Livingston, New Jersey, deals with a vast array of legal and financial issues for his clients. Thirty years ago when he was a law student, Hauptman noted, elder law was not widely recognized as a distinct discipline. Today, the number of elder law attorneys remains relatively small compared to other specialties.

“However, there are no shortage of instances in which we have received calls from prospects who have been provided incorrect information, such as concerning how to qualify for Medicaid,” Hauptman continued.


Hauptman added that over the last 25 years, the number of assisted living facilities and home health agencies has increased dramatically. While most seniors and their families would prefer remaining at home, government benefit programs make that more difficult. He said there are companies that can help families file for benefits, but consumers should be cautious, as those firms cannot typically offer legal advice or advocate for their customers. He encouraged families to seek assistance from attorneys who specialize in elder law, such as members of the National Academy of Elder Law Attorneys or those listed in the state bar association’s elder law section.

Regardless of age, financial literacy is important no matter when clients begin the planning process, according to wealth advisor Michelle Ogden CFP®, CRPS®, CKA. Ogden is the founder and CEO of Ogden Wealth in Winter Park, Florida.

“Time plays such a critical role, so the sooner you start saving and investing, the better,” Ogden said. “We do our best to educate and empower our clients to make the best decisions they can with the information we have at hand.”

The pandemic-fueled economic crisis also impacts retirees and those planning for retirement. Most U.S. retirement investments are in 401(k) or similar vehicles. The 2020 stock market plunge reduced those savings at the same time many workers faced difficulties making new contributions.

With the demise of the traditional defined-benefit pension, the burden of retirement planning is now on individuals with defined contribution plans, said Charles W. Johnson, founder of Guardian Planners in DuBois, Pennsylvania. Many of these plans are equity-based, he noted, but most offer little investment guidance to participants.

“For those young people willing to learn, the markets during their lifetime have given them nothing but glorious returns, and very little pain,” he said. “Without a foundation of historical and practical experience, many bad decisions will be made through ignorance that could irreparably harm their financial futures.”

Ultimately, the global economic slowdown of 2020 offers opportunities for both young and old to improve their financial skills as they weather the first serious downturn in more than a decade.

“Financial literary cannot predict or remedy a crisis,” said Billy J. Hensley, NEFE president and CEO, “but financial education will play a pivotal role in the economic recovery of our country.”