Millions of Americans desperately need your help to explain to them the ABCs of personal finance. Financial illiteracy in the United States runs across various income groups and is not limited to just men or women, according to a new survey.

Those are some of the conclusions of the first annual financial literacy survey by Stash, a digital investment advisor. “There is widespread misunderstanding among respondents on basic investing financial planning concepts,” according to the survey. Millennials tend not to use the 401(k)-retirement saving vehicle.

“Even though a majority of millennials said they are investing for retirement, fewer than half (48 percent) contribute to a 401(k) plan,” the survey said. A significant number of respondents don’t know how compounding works. “When two out of five survey respondents don’t understand how compounding works, you can bet people are missing out on opportunities to maximize their savings.”

Here is some other data from the survey: 41 percent of respondents “do not understand that a diversified portfolio is a safer investment than a single stock.” American women, the Stash survey said, are doing as badly as American men. Women invest but tend to invest smaller amounts than men, the survey said.

“The Stash survey found that “almost half of female respondents (47 percent) invest between $1 and $500 each year.” While most men and women invest something each year, the survey found, about 20 percent of women and 10 percent of men invest nothing. However, those who had some investment knowledge, those who are experienced investors, tend to be much closer to achieving goals than beginners, the survey said.

The survey questioned some 26,000 Stash investors and 1,100 people from the general population. All sorts of Americans of various income groups, genders and ages know very little about personal finance so financial disaster could be just around the corner for them. The problem is many Americans don’t know what they should know, according to a Stash executive.

“Most Americans know they need to be saving and investing for the futures, but they do not understand the fundamentals of what they entail,” said Brandon Kreig, CEO and co-founder of Stash. He emphasized that the survey found the problem is not confined to one age or gender.

“I’m not surprised by the survey. You reap what you sow, and in this country we emphasize consumption at the expense of saving and investing,” said Anthony Ogorek, CFP, an advisor in Buffalo, New York.

So what’s to be done about “widespread” financial illiteracy? Michael Kitces, CFP, an advisor in Reston, Va., questions if mandating personal finance courses in school will solve the widespread lack of knowledge.

He says advisors must be educators because people often forget much of what they learn in the classroom. “I think the biggest issue when it comes to financial literacy is that, just like most types of book-education learning in school, it’s hard to internalize the knowledge and really retain it when it is actually useful and relevant to them at the time,” Kitces said.

Advisors and other professionals should close this information gap, Kitces says. They must be educators who demonstrate the relevancy of many investment topics in everyday life. Ogorek agrees that advisors must be educators. “We help people learn financial literacy so they can make the right choices.”

Still, he says it is important for the average person to take investment and financial planning courses in school.  “It should be part of every curriculum,” adds Ogorek.

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Source: Stash