Data & Research April 5, 2022

Crypto Investing and Financial Literacy Across Generations

While most people in each generation still expect to rely on traditional income sources such as 401(k)s and Social Security in retirement, cryptocurrency has also made it onto the list.

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In a new multi-generational financial literacy study, Investopedia suggests that while most U.S adults only have a beginner’s level understanding of cryptocurrencies, many still plan on using these assets as a key source of retirement funds.

The “2022 Investopedia Financial Literacy Survey” asked 4,000 U.S. adults—1,000 each from Generation Z (defined here as those 18 to 25 years old), Millennials (26 to 41), Generation X (42 to 57) and Baby Boomers (58 to 76)—about their financial know-how, habits, worries and retirement plans. The survey results suggest that Americans are simultaneously trying to grasp more about their personal finance basics while also learning about cutting-edge topics, such as investing in crypto.

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While about half of Americans feel they have a strong grasp of financial literacy basics, such as spending, budgeting, paying taxes and saving, the survey notes that far fewer have the same level of understanding when it comes to more advanced investing topics. The same is true with respect to digital currencies.

Overall, 57% of adults surveyed are invested in some capacity, but just one in three say they have advanced investing knowledge. Even fewer (one in four) report strong knowledge of digital assets, such as cryptocurrency, blockchain holdings and non-fungible tokens. The survey results, according to Investopedia, show U.S. adult still have much more to learn.

The survey found that Millennials feel they understand investing the most, as 44% report advanced knowledge on the subject. Gen X follows closely behind (37%), followed by Gen Z (31%), and Baby Boomers (26%).

When respondents were asked about their knowledge of various financial concepts,  even fewer people displayed a strong grasp of cryptocurrency, the blockchain and NFTs. Half of all survey respondents (49%) say they only have a beginner’s understanding of these emerging—and much-debated—aspects of financial technology.

According to the survey, Millennials are the most confident in this area, as 41% say they have an advanced understanding of digital assets. Similarly, 39% of Millennials suggest they could explain cryptocurrency to someone else, but only 25% say the same about NFTs. Members of Gen Z and Gen X are on about the save level, while Baby Boomers’ knowledge trails behind significantly.

Despite the gaps in knowledge, the survey shows that a sizable portion of each generation has invested in crypto and related assets, which Investopedia says indicates more emerging technology education is needed “to meet people where they are.”

Crypto-enabled investments are popular among three of the four generations surveyed—Gen Z, Millennials and Gen X. The survey says that 38% of Millennials have some kind of cryptocurrency investment in their name, making it the most common investment this generation holds and just as popular as investments in stocks.

Gen Z and Gen X are not far behind, with cryptocurrency as their second most popular type of investment, while the survey shows only 6% of the Baby Boomers say they hold the asset.

When asked what assets they expect to yield the greatest returns for them over the next decade, Millennials, Gen X and Gen Z all say cryptocurrency, followed by stocks. Baby Boomers think their stocks and mutual funds will produce the greatest 10-year returns, but cryptocurrency still surpassed more traditional investment vehicles such as index funds and exchange-traded funds, the survey notes.

Investopedia says its survey has affirmed that younger generations feel like they have more to learn about personal finance fundamentals, while older generations are focused on planning for the future and maintaining wealth. These findings, according to Investopedia, reinforce the need for ongoing financial education.

Gen Z say they are least educated when it comes to taxes, borrowing, insurance and retirement. They are also the generation that wants to learn more about doing their taxes, with 34% saying this is the most important financial skill they could learn today.

Millennials, who feel more informed when it comes to savings, investing and cryptocurrency than other generation, have their eyes on improving their credit scores, which the survey says is key for many common mid-life financial moves, such as buying a home or car.

Members of Gen X, many of whom are nearing the average retirement age, are most interested in saving for retirement. Baby Boomers, many of whom are already retired, according to the survey, are most interested in learning how to better protect their wealth by securing their personal online financial information. 

“Our relationship to money, investing and financial planning has radically changed in the past few years, as new asset classes like crypto and NFTs have emerged just as millions of people are taking their first steps into investing,” says Caleb Silver, Investopedia editor-in-chief. “What hasn’t changed is the need for relevant financial education—but in a modernized curriculum that addresses these new financial products and services, designed to serve the people who are dependent on them to build their wealth.”

An earlier survey by Capitalize saw similar results, with 61% of respondents viewing digital assets as a strong retirement investment option, even though 57% view them as volatile investments. Yet, while more than half of financial advisers expressed confidence in crypto as a short-term strategy, they were slightly less bullish on its long-term.

One issue involves the risk that advisers assign to digital assets. Over 80% place cryptocurrencies in the “risky” category, with 76% considering such investments to be volatile. While 58% believe digital assets are “overhyped,” 55% still believe cryptos offer potential in retirement accounts.

When it comes to 401(k) plan fiduciaries considering plan investments in cryptocurrencies, the Department of Labor recently published compliance assistance to address the issue, with the goal of protecting the retirement savings of U.S. workers from extreme volatility and legal risks. Published by the DOL’s Employee Benefits Security Administration, the release cautions plan fiduciaries to exercise “extreme care” before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.

In the release, EBSA says cryptocurrencies tend to be too speculative and volatile as investments to serve a meaningful purpose in tax-qualified retirement plans. As the release explains, at this stage in their development, cryptocurrencies have been subject to extreme price volatility, which may be due to the many uncertainties associated with valuing these assets. Other issues cited by EBSA include the speculative conduct of crypto market participants and the security risks demonstrated by widely published incidents of theft and fraud.

Data & Research April 5, 2022

Study Finds Advantages to Virtual Retirement and Financial Wellness Education

An increase in participant engagement and confidentiality are reasons to continue virtual meetings when employees are back in the office. 

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The COVID-19 pandemic accelerated the use of online retirement and financial wellness education for employees. A study shows that delivering such education virtually has some advantages over in-person sessions.

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In 2021, more workers attended virtual education sessions to learn about their retirement plans and other financial topics than in 2020, Charles Schwab Retirement Plan Services’ data  shows.

For workers who attended Schwab’s education sessions last year, 42% watched via an on-demand session rather than attending live virtual meetings, a 33% increase from 2020. Canceled meetings and rescheduling were also 69% lower from 2019, when 76% of educations sessions were delivered in-person, Schwab finds.

Continuing to hold virtual meetings when employees are back in the office is likely to remain useful, data shows. Schwab followed up with workers post-session, which revealed that 93% felt better prepared to take the next financial step after attending virtual education meetings and 95% felt confident they could find the resources needed to take that step.

For content delivery, 98% said the virtual sessions were the right length, and 96% said the speakers presented the content in an easy-to-understand and engaging way.

General retirement education and financial wellness sessions were particularly successful in the virtual format, as financial wellness topics including college savings and debt management garnered over four times the attendance per session than topics focused on the company’s specific retirement plan.

Holding virtual sessions also helps plan sponsors evaluate and understand the plan through greater data and deeper insights, says Nathan Voris, director for investments, insights and consultant services at Schwab Retirement Plan Services.

“One of the benefits of virtual is we do have more data, so we can gather additional data on who was attending and when, and we can track them to see what actions were taken if they did take action,” he adds. “The ability to report back on success and provide insight on what the participants are wanting and needing is a little bit higher with virtual and on-demand sessions than for in-person sessions.”

“People are watching, people are engaging, and it makes sense to have that in your toolkit, along with all the other ways in which an employer and plan sponsor would work to engage their participants,” says Voris. “Results show that people want it, that it works, and it should be a key part of the way in which recordkeepers, plan sponsors and advisers communicate to participants.”

Continuing Virtual Meetings

Plan sponsors that continue to hold virtual sessions with workers back in office must be deliberate in planning and delivering content, explains Voris.

“If you’re planning virtual sessions, think about when they [workers] can participate, think about the content that resonates with them, the hot topics that are happening within the employers’ walls,” Voris says.

Plan sponsors and advisers should use virtual live presenters and on-demand sessions.

“Virtual doesn’t mean live all the time,” Voris explains. “It provides that participant with the flexibility that they can consume content and learn at their pace when they want, how they want. They can include a spouse or partner, they can start the session and hit pause and have dinner with their family and resume.”

Stephanie Hunt, senior retirement plan consultant at OneDigital, says that “a lot” of the firm’s clients will return to the office or have already returned for two or three days a week. She says that when continuing virtual meetings, plan sponsors and advisers must not overschedule.

“Even though you’re not sitting in a room full of people, you’re still sitting at your desk, and if it’s back-to-back to back-to-back virtual meetings that can be very draining for employees,” Hunt says. She counsels limiting meetings to 30 or 45 minutes.

Virtual sessions allow participants to learn differently, and “cater [to] those folks” who may be more introverted or shy about asking a question in person, says Voris.

“It can be a little bit more private; no one wants to talk about their personal debt in front of their co-workers,” he explains.

Voris adds that another plus for plan sponsors, and larger ones in particular, can be reaching employees spread across the country.

“They potentially could be working all time zones and all shifts, so the reality is that virtual and on-demand education and content is more effective for a very diverse workforce,” he says.

While virtual meetings have shown successes, watching on a screen is not a complete replacement for in-person interaction, says Kassandra Hendrix, chief marketing officer at LeafHouse Financial & investGrade.

“It is good to be able to see people’s facial expressions,” she says. “You can tell a lot more from the tone of the conversation by seeing each other, making eye contact, than just looking at a black box on your desk.”

Going forward, she expects a hybrid of virtual sessions with on-demand options and in-person as business travel resumes. “Virtual meetings are the new conference call,” she says.

 

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