Essential Pittsburgh
6:55 pm
Wed July 23, 2014

The Economic Cost of Financial Illiteracy

Could financially literacy save people from retirement and unemployment problems?
Could financially literacy save people from retirement and unemployment problems?
Credit Credit Alan Cleaver / Flickr

How much do you know, or think you know, about your personal finances? In a world where savings and investment options are increasingly complex, studies show that millions of Americans lack financial literacy.

Paul Brahim, Chairman and CEO of BPU investment firm and a member of the Board of Directors of the Pittsburgh Chapter of the Financial Planning Association, says financial illiteracy is causing a social crisis in retirement.

"We see baby boomers that want to retire, that are now taking the dream job at Walmart as a greeter. They're taking the power tool job at Home Depot because they can't afford to retire on the assets they've accumulated. Look at the amount of people coming in behind. Nineteen thousand people everyday turning 65,  I think is the statistic. It's extraordinary that the generation underneath that has a different thought process about work. The generation underneath thinks that they work to live not live to work and they're not nearly as concerned about things in the future as they are quality of life today. So it just compounds and gets worse."

With more people working past retirement age, fewer new jobs are opening up for the younger generation, which is a cause for concern when it comes to unemployment.

So how can better financial literacy help?

"The National Endowment for Financial Education says, the best way to address financial literacy is for corporations to sponsor education programs by qualified instructors and to teach financial literacy in the workplace." Says Brahim

"And that should be followed with counseling sessions that are paid for by the corporation. You have to reach this working generation first. Step two, it needs to be taught in high school. Remember we used to learn Shop and Home Ec? But, did anyone teach you the difference between a stock, a mutual fund, life insurance, how to save? Did anyone teach you that? And they should have. It begins at that high school level and through college."