The education mandate

Tom Foster

By Tom Foster
E. Thomas Foster Jr. is head of strategic relationships for retirement plans for MassMutual.
Posted on Sep 2, 2019

Uncle Sam wants to teach Americans a few things about the value of a dollar.

The Financial Literacy and Education Commission (FLEC), chaired by U.S. Treasury Secretary Steven Mnuchin, is recommending that college students receive “mandatory financial literacy courses.” Continuing education about financial issues for all Americans would make sense as well, the Commission concluded.

“A lack of financial education and financial literacy is common among the student

population. Institutions of higher education can address this challenge by effectively engaging students in financial literacy and education,” the FLEC stated in a recent report .1 “The FLEC recommends that institutions of higher education require mandatory financial literacy courses,

deploy well-trained peer educators, integrate financial literacy into core curricula, and

communicate with students about financial topics more often than during required

entrance and exit counseling.”

It’s a model that many financial advisors, especially those who support 401(k)s and other defined contribution retirement plans, as well as retirement plan sponsors already pursue at the workplace. While mandatory sessions for financial education topics are typically not mandatory, employee education and advice about retirement savings is highly valued by employers, with many saying they want advisors to conduct educational sessions for employees more frequently, according to MassMutual’s Winning Combination Study .2

The FLEC underscored the importance of financial education not only in school but throughout a person’s life. “Along with preparing the workforce, institutions of higher education can prepare their students to make financial choices throughout their lives that enable them to effectively participate in our economy, build wealth, and attain their goals,” the FLEC asserted.

Whether financial education should be mandatory at any time during a person’s life is debatable. What’s not debatable is the need for and value of financial education. Increasingly, advisors who support retirement plans are expanding education at the workplace beyond retirement to help workers improve their overall financial lives. It’s important work that is badly needed.

An overall lack of understanding about finances bedevils 39 percent of middle-income Americans who say they find their household finances too complex to manage, with 51 percent of those with household incomes of less than $45,000 saying so, according to MassMutual’s Middle America Financial Security Study .

Although many advisors create their own educational sessions, help is also available from retirement plan recordkeepers and employee benefits providers. MassMutual, for instance, maintains a comprehensive catalogue of educational workshops available for advisors to present at worksites, either by themselves or in cooperation with one of our retirement education specialists (RESs).

There are workshops on nearly a dozen retirement planning topics, including the basics of an employer’s retirement plan. Other financial planning topics include managing credit, setting financial goals, creating a budget, the basics of investing, understanding Social Security, planning for college expenses, the benefits of annuities and many others. The workshops are designed to help enhance attendees’ financial knowledge as well as their financial wellness.

Advisors are increasingly customizing educational workshops to address the financial needs of specific groups such as women, minorities, workers who are within five or 10 years of retirement, and others. Different people differ in their retirement saving and financial needs, negating a one-size-fits-all approach.

But education can take many forms, from group seminars and individual meetings at the workplace to webinars and online training sessions. What makes sense depends upon the needs of employees, the employer and the makeup and location of the employee population.

Whoever conducts the education – advisors, MassMutual or Uncle Sam – the goal should be the same: to help Americans better manage their money throughout life. Helping more people solve shorter-term financial problems eventually helps them focus on longer-term challenges such as saving for retirement.

 

1 Best Practices for Financial Literacy and Education at Institutions of Higher Education, U.S. Financial Literacy and Education Commission, 2019.