Americans Get an "F" for Financial Literacy. Here's How to Do Better.

"At least our hearts are in the right place?"

That's the kindest takeaway we can muster from a new Allianz Research study that shows that Americans are the biggest savers among their developed-country peers … but also the least financially literate.

I'll be honest: This one burns.

I'm not even going to massage this intro. Let's just clench our teeth, make our way through the numbers, then get to the helpful part: what we can do to improve our financial knowledge and get out of the cellar.

Allianz: U.S. Financial Literacy the Worst Among 8 Developed Nations

A new Allianz Research study (PDF here, you masochist) brings shame upon all our households. Allianz surveyed more than 8,000 adults across the U.S., U.K., Germany, France, Austria, Italy, Poland and Spain, and they said the data "paints a fascinating picture of how Americans are navigating an increasingly complex financial landscape."

What a generously polite way of saying "you bunch of rich dumb-dumbs!"

Anyhoo, here are the findings:

• The U.S. ranked last in financial literacy. "One-third (33%) of Americans demonstrate a low level of financial literacy—the largest share of any country surveyed—while only 13% scored in the highest literacy category."
• Americans are the world's biggest savers—at least in intention. "The U.S. is the only country where the largest share of respondents say they plan to save more, led by Gen Z (60%) and Millennials (51%)."
• Younger Americans aren't significantly more financially literate than Baby Boomers. "Contrary to expectations, there is little generational difference in U.S. financial literacy, suggesting growing up with investing apps and digital finance hasn't translated into stronger financial knowledge."
• The gender gap persists across every generation. "Men are nearly twice as likely as women to demonstrate high financial literacy, while women are significantly more likely to say they don't know how they'd invest additional savings."
• Americans are embracing AI—but not fully trusting it. "Twenty-two percent of Americans already cite AI as one of their primary sources of financial advice, above the international average, with adoption highest among Gen Z. Yet the research finds AI increases confidence more than actual financial capability, creating a risk of overconfidence."

I think I just heard my passport shriek.

OK. We're at least getting something right. Being willing to save more money (and doing it) is, in fact, really important. Toss enough cash and time into the compounding machine, and you can overcome a lot of mistakes.

Young and the Invested Tip: And if you're not saving enough, one way to make it a habit is to automate it.

But we don't all have enough income and/or time to blunt-force our way to success. And even if you do … well, wouldn't you like to do better than that?

8 Financial Literacy Tips

"Allianz Research concludes that improving financial literacy may be one of the most overlooked ways to strengthen long-term household wealth, especially as AI becomes a more common source of financial guidance." 

We can't help but agree. So if you feel personally attacked by Allianz's study, here are a few things you can do to help bring America's financial literacy closer to par with our Olympic medal count.

1. Start with what you don't know that you don't know.

The trickiest part of financial illiteracy is that it's often invisible when you're experiencing it—until you need it.

So the first thing to do is put together an honest inventory. To get you started, here's a list of questions across several financial disciplines that you should ask yourself:

• Do you know how to put together a budget?
  • Be honest: Could you do it on a piece of paper or a spreadsheet, or do you need an app to do it for you?
• Off the top of your head, can you name all of your necessary and discretionary expenses?
• Do you know both your gross and net income?
  • Do you know where the difference between those is going?
• Do you know your credit score?
  • Do you know what's propping it up and/or holding it back?
• Do you know the difference between a taxable brokerage account, a 401(k), and an IRA?
• Do you know the difference between an IRA and a Roth IRA?
  • Do you know which one makes more sense given your tax bracket?
• Speaking of which, do you know your tax bracket?
• Do you know if you take the standard deduction?
• Does your workplace offer a 401(k), 403(b), 457(b), or similar plan?
  • Are you invested in it?
  • Do you know what you own in it?
• Does your employer offer an employer match?
  • Do you contribute at least up to that match?
  • If you don't, do you know how much in potential earnings you could be losing out on?
• If you have money in a savings account, do you know how much interest you earn?
• If you have credit card debt, do you know what your interest rate is?

From there, the path forward is simple: If you can't answer any of these questions, start seeking out the answers. I've provided links where I can, but some of these require you to gather information only you can access.

Take this same mindset to any other financial concepts you come across, whether you're reading a story or listening to a friend. Write down whatever the term or concept is, then start digging.

2. Move on to what you've been avoiding.

A common financial issue boils down to fear and anxiety. As a stack of bills grows taller, or as credit card debt becomes larger, the problem will increasingly seem insurmountable—and that will push many people away from addressing it because even the idea is just too stressful.

It's possible you have a question or two that you know you should ask, but that you're nervous about or even afraid to breach. It could pertain to solving debt. It could be about whether you can afford to get a mortgage. It could even just be about whether you're saving enough.

Whatever the question, I can tell you from both first- and secondhand experience that when it comes to your money, knowing is always better.

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3. Read the boring stuff, too.

I have reviewed brokerages, stock apps, budgeting software, and other financial tools for years. And one thing that I marvel at is not just how rich the educational material can be, but how much they've spruced it up.

Seriously! Whether it's gamifying the material, using multimedia, or just having a more conversational tone in articles, financial services providers have gotten really good at making a lot of how-to information easy and almost fun to read.

But some financial information is drier than Steven Wright's delivery.

And you should read that too.

Young and the Invested Tip: Whenever we write about investment funds, we always link to the provider page. Why? Because there’s oodles more info there that could be useful to you.

Your 401(k) plan summary? Miserable. Your health insurance provider's summary of benefits? Gag. No one wants to read these documents, and I don't blame them—but the people who do often end up ahead. As someone who pores through mutual fund and exchange-traded fund (ETF) provider pages and prospectuses, I can tell you that a single afternoon spent reading about what you own can save you more over 30 years than most "side hustle" advice ever will.

Look, you don't even have to dive in all at once. Start small. Go into your investment accounts and pick out a mutual fund or ETF. Go to their provider page. (Say, Vanguard's page for VOO, or Fidelity's page for FXAIX). Find a term you don't understand. Look it up, and learn about it to the point where you feel like you could explain it to a friend over coffee. Then rinse and repeat each week.

Financial literacy isn't a credential. It's the accumulation of hundreds of these small "oh, that's what that means" moments.

4. Don't castigate yourself over mistakes. Learn from them.

Reading is great, but there's a reason why science classes have lab sessions. 

Sometimes, you just have to do.

When your own money does something you didn't expect—a surprise tax bill, an overdraft fee, an investment that didn't perform the way you assumed it would—don't get mad at yourself, but don't just move on, either. Interrogate yourself. 

Why did that happen? Did you know about this risk? If not, was the risk stated somewhere you easily could have read about it? What could you have done differently?

A habit of reviewing your own financial decisions turns your own experiences into actual knowledge.

Young and the Invested Tip: Of course, where possible, it's helpful to identify potential mishaps before they happen. For instance, look out for these 401(k) mistakes.

5. Follow people who show their work.

There's no shortage of financial content out there. And while we're clearly the undisputed best at it, there are plenty of media outlets who dispense sage, well-researched guidance.

But there are also a lot of vibes gussied up as advice.

Look for sources—newsletters, advisors, writers—who explain the why behind their recommendations, not just what. If someone tells you to max out your health savings account (HSA) before you max out your 401(k), do they explain the triple tax advantage, or do they just say "trust me"?

The explainers are often worth your time. The absolutists typically aren't.

Widen your diet a little, too. Let's say you read a lot of personal content aimed at accumulation (Save more! Invest more! Hustle more!). Consider reading something about decumulation. The different strategies for retirement withdrawals. How retirement income is taxed. How required minimum distributions (RMDs) work. 

A lot of financial literacy skews toward earning years because that's where content demand is. Our own analytics show that's what people like to read about. But the back half of the story matters just as much—and arguably more, as there's less room to fix mistakes.

6. Talk about money out loud.

This one's uncomfortable, and how much you can/should apply this will really vary from person to person, but it matters: Financial literacy will grow with conversations.

We're not saying to blabber your salary to anyone who will listen. Just ask a friend how they picked their health insurance plan, or ask a family member how they deal with their emergency fund. Don't ask for advice—just ask about what they did. You might see how following conventional advice leads to a good result. But you might also discover where broad advice comes up short, or come across potential mistakes you hadn't thought about.

There are a lot of learned experiences that go uncirculated because people assume talking about money is rude. It's not. Silence often results in other people making the same avoidable mistakes.

7. Don't over-rely on artificial intelligence.

AI can be the ultimate shortcut, but that's the problem.

Again, Allianz's research found that AI increases people's confidence in their financial knowledge more than it increases their actual financial capability. Translation: people feel smarter about money after talking to an AI tool than they actually are.

That confidence is exactly what stops people from double-checking, from asking for a second opinion, or from noticing when the "advice" they get doesn't quite fit their situation.

Learning comes through discovery. Ask AI to quickly crunch numbers or to point you to a couple of sources. But ultimately, if you're trying to improve your financial literacy, and not just your financial performance, you need to do most if not all of the legwork yourself.

8. Talk to a financial advisor.

The whole point of paying a financial advisor is so they can do things for you that you either can't do, or that they can do better and in a more time-efficient manner. Same deal as just about any other professional.

But a good relationship with an advisor goes well beyond command-obey.

Walk into your meeting with questions rather than just nodding along. The more you understand, the better you can evaluate whether the advice you're getting actually fits your situation. And at least in my experience, I can tell you that professional financial advisors are more than happy to share what they know.

Young and the Invested Tip: Choosing a financial advisor is a bit more involved than deciding where to get dinner. Here's our guide.

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Thanks for reading along with us, and we'll see you again next week!

Riley, Kyle & Hannah

Young and the Invested

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