ATTENTION: America is facing an emergency and YOU may be at risk. Most Americans are financially illiterate — both working and retired individuals are unable to “understand the topic of money.” In fact, 25% of non-retirees have no retirement savings whatsoever, making them unprepared for their financial future (Federal Reserve Bank, 2018). Even current retirees are financially illiterate, with the TIAA Institute reporting that retirees answer only 57% of Personal Finance Questions correctly (TIAA Institute, 2020).
However, unlike common perceptions, financial literacy benefits extend beyond retirement and financial preparedness. Tracy Frizzell, Executive Director of the Economic Awareness Council, says that behaviors, such as recognizing the advantages of saving money, can garner the same thought processes and habits related to those needed to maintain good personal health, exercise routines, and more. Furthermore, training people to recognize their goals and values leads to improved decision-making and health outcomes.
When analyzing US life expectancy, there is a gap of nearly 15 years between the richest 1% and the poorest 1% of males (Chetty et al., 2014). Many health disparities in the U.S. stem from socioeconomic factors such as income, access to healthcare, and education levels. Raj Behal, MD, MPH, and Chief Quality Officer at One Medical, noted that poverty-stricken individuals “tend to be uninsured or underinsured and rely primarily on the publicly funded healthcare system, [which is typically] underfunded and [lacking] staff and equipment to provide a high level of care.” Though factors like income and education are correlated with financial literacy levels, other impacts are often overlooked (St. Louis Federal Reserve Bank, 2018).
Considering additional implications for patients, Bahal said, “When faced with the prospect of care that is expensive, many will simply defer the care - they are making a decision without understanding what financial options are available to them.” A study conducted by the Rush Memory and Aging Project found that people with “higher levels of health and financial literacy exhibited better healthcare and financial decision making,” even after adjustments for health and socioeconomic confounding variables (James et al., 2012).
Overall, financial literacy impacts lives in ways most people have not even considered — despite other determinants, it teaches people to better understand themselves, and in turn, improve their decision-making. Financial literacy is proven to make a positive impact on life decisions, health outcomes, and life expectancy.