Putting a Price on Financial Literacy

 A new report claims that Americans lost nearly $1,000 last year due to a lack of financial literacy — and while that was less than the year before, the data seems a little . . . squishy.

The report comes from the National Financial Educators Council,[i] which has been conducting this particular survey for several years now.[ii] They drew their conclusion from a survey of some 1,200 American adults between Dec. 24 and Dec. 28 who responded to the question, 

"During the past year (2025), about how much money do you think you lost because you lacked knowledge about personal finances?"

Now, I’ve previously commented on the inherent unreliability of surveys based on self-reporting of financial matters — and this one, taken in the midst of the holiday season (and the aftermath of Christmas unwrapping) is surely no exception. Moreover, year-over-year comparisons of COMPLETELY different groups of people surely can’t be considered a reliable-trends benchmark (though this wouldn’t be the first survey to attempt that). That these year-over-year comparisons (of highly questionable results) are drawn from completely different groups — and then those “assessments” AVERAGED … well, you begin to appreciate just how “squishy” this conclusion might be.

But then, as if the result wasn’t sufficient to grab your attention, they take that average — and multiply it by the 260 million adult residents (according to a U.S. Census Bureau estimate) to claim that in 2025 more than $246 BILLION in lost revenue. Ah, math…and the “magic” of “compounding” questionable numbers to make them even bigger (and more questionable).  

So, what does this tell us about the cost of financial illiteracy? I’d say — not much.

While I’ve little doubt that a lack of financial acumen costs Americans money, I find little credibility on their self-assessment of that impact,[iii] not to mention what happens to that figure once it’s “averaged” (and then multiplied) — and nothing to suggest that it costs them less now than a year ago, beyond sheer economics. Heck, it probably costs them considerably more than they think.

Once upon a time I, like many of you, advocated for more financial education in schools,[iv] decried the extended emphasis on things like s.ex education and PE with no time or allowance for things like money management and budgeting (which, ironically, was once part of the curriculum of what was actually labeled home “economics”). In recent years, much to my dismay, I stumbled across research[v] that indicated that while financial knowledge can be shared, if there’s no practical application at hand, that knowledge tends to quickly atrophy. And — considering what has happened to my once working knowledge of AP Calculus — well, I find that entirely plausible.

At this point, I’d be remiss if I didn’t acknowledge that about 36 states have some kind of financial literacy requirement tied to high school graduation, and 29 of those require a dedicated personal finance course. I know that many of you are both currently and actively involved in programs to help young people achieve a much-needed level of financial acumen, if not literacy. I continue to see encouraging and inspiring LinkedIn posts and commentary about those activities. Good for you.

ad space

That said, the aforementioned research suggests that knowledge without application of that knowledge fades quickly — and that would seem to suggest that our industry needs to quit holding out as a panacea the notion that financial education programs in school will “solve” the 401(k) education problem. 

That doesn’t mean we should abandon those workplace efforts, certainly not in core areas like budgeting, debt management and saving. At a minimum, it might well dust off the cobwebs of their earlier education, if they were lucky enough to receive it.

There’s certainly a price to be paid for that education (or lack thereof), and even though it might come to actual application later than it might, it’s arguably still better late than never.

• Nevin E. Adams, JD

 

---

[i] To their credit, the NFEC actually has a definition of financial literacy: “understanding the topic of money.”  But they expand on that to say, “Financial Literacy is ‘Possessing the financial knowledge, behaviors, systems, team, and plan to confidently take effective action that best fulfills an individual’s personal, family, and global community goals.’” I’m not sure how workable that is in a real-life assessment, though they have an extensive website touting education programs and credentials purporting to do just that.

[ii] According to a press release, the NFEC first fielded this survey in 2017 as part of its research to clarify the status of financial literacy in the country. The organization then leverages the results to advocate for greater economic empowerment. In the three previous years' surveys, Americans reported losing $1,819 in 2022, $1,506 in 2023, and $1,015 in 2024 due to a lack of personal finance knowledge.

[iii] As long as we’re relying on self-reporting, I’d be more curious as to the “how” and “why” than the how much, as that might actually provide some insights on areas where financial education might actually help.

[iv] See “Focus” Group.

[v] See The Problem(s) with Financial 'Literacy'.