US Savers Estimate Lack of Financial Knowledge Cost Them $1,500 in ‘23

Americans estimated their own financial illiteracy cost them $1,506 per person in 2023, according to a new survey conducted by the National Financial Educators Council.  

The NFEC survey asked participants how much money they believe they lost in 2023 due to lacking knowledge of personal finances. The results were as follows:  

Generalizing the results to represent the the finances of approximately 258 million adults in the U.S., NFEC calculated that financial illiteracy cost Americans a total of more than $388 billion in 2023, an issue CEO Vince Shorb says starts with lack of attention to finances in early education. 

“Financial education still is not taught at schools with the rigor required of other core subjects,” Shorb says. “Parents aren’t really teaching their kids too much about money, either. Kids go to college, but not necessarily so they can be financially secure and successful.” 

The retirement plan advisement industry has not been blind to the issue, with advisories pushing further into participant education and wellness in recent years, including volunteer efforts in early education. In October 2023, the Retirement Advisor Council, an industry group, launched a financial education volunteer collaboration called FinLitFuture$. The goal is for advisers to work in their communities to forward early financial literacy. 

Advisers’ Role 

Courtenay Shipley, president of Retirement Planology Inc., says financial advisers should focus on helping clients build a good credit score, which she believes has the most impact on an individual’s financial life. 

According to Shipley, a credit score will control how much someone will pay for the privilege of using debt over their lifetime. She says it is imperative that participants understand what that score measures so they can adjust their behaviors and free up cash flow to spend other ways, including saving for retirement. 

“Financial advisers may be most interested in educating about investing, and don’t get me wrong, that’s really important,” says Shipley. “But the basic blocking and tackling of how to have a good credit score, good cash flow management, understanding insurance, how to plan for the expected, like college, and unexpected, such as estate planning, and being financially literate in the basics are much more impactful than splitting hairs about which large-cap fund a participant should choose to invest in.” 

Lack of Knowledge 

The cost of financial illiteracy has grown since 2017, when the NFEC began gathering data on the subject. From 2017 to 2019, the estimated cost rose steadily from $1,171 in 2017, to $1,230 in 2018 and then $1,279 in 2019. This was followed by some ups and down through 2020 ($1,634), 2021 ($1,389), 2022 ($1,819) and 2023 ($1,506).  

Asked why people feel they are losing more money, Shorb says increased temptations—prevalent advertising, comparison to peers on social media—are affecting financial behavior.  

“We feel we deserve what other people have,” he says. “I think there’s an increase in overspending and not aligning purchases with long-term goals. I don’t think it’s necessarily that they’re getting less financially literate. There are just other factors that are impacting a more complex financial market, more temptation out there.” 

Addressing the lack of knowledge when it comes to personal finance, Shorb encourages advisers to embrace personalization and meet individuals where they are.  

“Oftentimes, advisers will be pitching a one-hour workshop to get clients, which is fine, but is it truly meeting the needs of the employees?” Shorb asks. “Within a company, you may have guys working in the warehouse, salespeople, executives, middle management. Each has a different need.” 

The retirement industry is also focused on increased personalization in retirement plans. T. Rowe Price, a recordkeeper and defined contribution investment manager, noted personalization as one of its three key themes for the industry in 2024.  

The NFEC surveyed 1,540 U.S. adults from December 4 through 17, 2023.