WINDSOR, Conn., Aug. 7, 2019 — A new LIMRA Secure Retirement Institute (LIMRA SRI) study finds only 13% of American adults feel very knowledgeable about financial products and investments. While more than half of consumers cite their family as the top source of financial information, 58% said they wished their families taught them more about investments and other financial topics.
“Many Americans say they aren’t confident they have the financial knowledge to make informed decisions about products that could help them secure their financial well-being. While families – particularly parents – were likely to teach their children about saving and budgeting, they were less likely to discuss life insurance or the basics of investing,” said Alison Salka, Ph.D., senior vice president and director of LIMRA research. “Today’s consumers face a more complicated financial reality than prior generations. It is important that people understand the financial risks they face and have knowledge about the different tools they can use to mitigate that risk.”
The LIMRA SRI research shows the concept of saving in general was the most common financial topic families discussed (77%). Nearly half (48%) Americans remember discussing monthly budgeting, saving for retirement, taking out loans and other debt, and how credit cards work. Less than a third of Americans say their families discussed life insurance or the basics of investing.
The study finds a connection between financial literacy and saving for retirement. Even when controlling for age and household income, consumers who say they have knowledge about financial products and investments are more likely to save for retirement. Financial knowledge had the strongest impact among Millennials. Just over half (55%) of Millennials who said they weren’t knowledgeable also said they were saving for retirement, while 84% of Millennials who felt knowledgeable said they were saving for retirement.
“Beginning to save for retirement early in one’s career can have a demonstrable impact on a person’s retirement security down the line,” noted Salka. “The power of compound interest and time are undeniable. This is just one reason why it is important to start teaching children when they are young about financial matters, like saving for retirement and investing.”
The good news is parents are open to assistance when it comes to educating their children about finances. Seven in ten parents are at least somewhat interested in resources from financial services companies to help them educate their children about financial topics. When asked, parents say websites and online videos, such as YouTube, are the top two platforms they prefer to access information for their children. Over a third of parents with children under age 10 also said they would like to get information through online or mobile games, while parents of older children (ages 10-17) say they would prefer financial information taught in classes in local schools.
“Overall our findings show that consumers have an appetite to learn more about financial products and investments and to teach their children about financial matters,” said Cecilia Shiner, LIMRA SRI associate research director and author of the study. “In addition to traditional online tools financial services companies currently use to help educate Americans about these topics, it is important that they develop age-appropriate, engaging materials that parents can use to teach their children so they can be better prepared to make sound financial decisions when they become adults.”
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Serving the industry since 1916, LIMRA, a worldwide research, consulting and professional development organization, is the trusted source for industry knowledge, helping nearly 600 insurance and financial services companies in 64 countries. Visit LIMRA at www.limra.com.