Help close the financial literacy gap

Financial literacy

Your clients—and your business—can benefit from improved financial literacy


April is National Financial Literacy Month, designated by Congress as a time to teach Americans how to develop and maintain positive financial habits. And there’s certainly a significant need for improvements in financial literacy. Consider the following:

  • Thirty-five percent of Americans say no one taught them about investing.1
  • Only 30 percent of Americans were able to answer three simple financial questions about inflation, interest compounding and risk diversification.2
  • The U.S. only ranks 14th in the world in the proportion of adults who are financially literate.3
  • Nearly 80 percent of financial professionals see financial literacy as a problem—but only 40 percent are acting to address the problem.4

If you are not yet in that 40 percent group, you may want to start getting more involved in financial education efforts. When you do, you’ll be helping today’s clients, tomorrow’s prospects—and, possibly, your own bottom line.

Financially literate clients are better clients

While there may not be universal agreement on what defines “financial literacy,” there’s plenty of awareness of the problems stemming from lack of knowledge of basic financial and investment principles.

Perhaps one of the most noticeable signs of a deficient financial knowledge can be seen in those who, ironically, are most absorbed in education—college students. Upon graduation, the average borrower has more than $37,0005 in loans. And that’s just the average figure—many students are graduating with six-figure debts. It’s not hard to see that this type of debt load in one’s 20s can haunt individuals for decades, interfering with plans for home ownership and impacting retirement savings.

This isn’t to say that accumulating student loans is strictly a matter of financial ignorance—as you’re well aware, college is extremely expensive, and growing more so every year, and many students may have little choice but to take out loans. And yet, if they were more financially astute—especially as to the effect that their monthly loan payments will have on their disposable income—they might have found alternatives that could at least have lessened the red ink they incurred.

Signing up for credit cards that charge exorbitant interest rates could be directly related to inadequate financial literacy. And although financial scam artists may focus most intently on the elderly, they do also hit on vulnerable people of any age—people who could have better protected themselves if they had received more financial education.

Clearly, a higher degree of financial literacy would serve individuals well, in many aspects of their life. And here’s something else that will be of particular importance to you: Clients with greater financial knowledge are better clients because they know the value of guidance from a financial professional. And since they are more likely to make better moves regarding borrowing, saving and investing, they will almost certainly end up with greater financial assets than their less-educated peers—and that’s good news for professionals like you.

What can you do?

So, given the need for greater financial literacy, and the problems that result from lack of it, what can you do to help?

Here are a few possibilities:

  • Deliver financial education. As an experienced financial professional, you have a tremendous amount of knowledge to share. So you could create a meaningful presentation or leverage existing resources through SIFMA Foundation’s Invest It Forward™ program. They have age appropriate financial education and capital markets literacy materials that have been FINRA reviewed. Don’t let the financial industry be a mystery to young minds, reach out to teachers you know, local schools, YMCAs, community centers and similar places.
  • Give parents some money management ideas for children. You will be providing a valuable service to your clients—and connecting with them on a deeper level—by giving them some ideas of how to talk to their children about financial topics, such as budgeting, impulse spending, setting savings goals, basic investing, etc. You can find a valuable resource for parents in our RBC publication, “Financial Literacy For Our Children.”
  • Encourage clients to learn more about their 401(k) or similar retirement plans. Many employers are now doing a reasonably good job of helping boost their employees’ financial skills, at least in regard to using their 401(k) or similar plans to maximum advantage. Encourage your clients to take advantage of this type of education—but also be prepared to step in to provide guidance and advice. As you know, you will still need to help your clients integrate their 401(k) or other retirement plans into their entire investment portfolio, in terms of investment selection, risk tolerance and other factors.
  • Never stop educating your own clients. By communicating consistently with your clients, you can help raise their own financial literacy, year by year. Send out a regular newsletter, in printed form or via email. If you read an interesting article forward to your client base. Most importantly, be an active listener—and listen “between the lines,” too. Treat every conversation as an opportunity to better understand your clients’, so every time you come across a “teachable moment,” take full advantage of it.
  • Lend your support to other groups providing financial education. You may be able to provide help, in the form of educational materials or event sponsorships, to groups such as Junior Achievement that help teach children about entrepreneurship, money management and similar topics.

Financial education pays off—for everyone

In every field of human activity, more knowledge is better than less—and that’s certainly true in the financial arena. By doing your part to raise the financial intelligence of your clients, prospects and local community, you can help individuals speed their progress toward their long-term goals—while helping build more opportunities for your business in the future. 

  1. Survey by RBC Wealth Management – U.S. and City National Bank
  2. Study from George Washington University and the University of Pennsylvania
  3. Standard & Poor’s Global Financial Literacy Survey
  4. 2018 InvestmentNews survey of financial professionals
  5. Student Loan Debt Statistics In 2018: A $1.5 Trillion Crisis. Retrieved from

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