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Monday, March 18, 2024
March 18, 2024

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Experts say elderly need financial education

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Like youth, financial literacy may be wasted on the young.

Lamenting relatively poor results after years of trying to entice young people to think about their financial futures, panelists at a recent Federal Reserve conference on the topic suggested that a more holistic — and longer lasting — effort is needed.

In other words, financial education isn’t just for kids, and it should go beyond mobile apps and automation, experts said.

“We can’t write off adults,” said Gail Hillebrand, the associate director for consumer education and engagement at the Consumer Financial Protection Bureau, who spoke at the Federal Reserve conference in Chicago. The CFPB is experimenting with literacy programs that engage adults at the point of sale, so to speak, or when they go to a financial institution for a specific product.

And mobile apps and automated retirement plan contributions, though they are widely credited with getting more people to at least save small amounts, won’t really create more informed consumers, said John W. Rogers Jr., the chairman of Ariel Investments. At any age, understanding the fundamental values of compounding and investing will produce an informed electorate, he said.

For older adults, to be sure, there are larger issues than literacy.

“You can’t save your way out of poverty, and the core problem for a lot of older people is that they didn’t earn enough to be able to now cover the high cost of growing old,” said Kevin Prindiville, the executive director of Justice in Aging, an advocacy group that works on senior poverty issues. He did not participate in the Federal Reserve meeting. “Lower-income workers can save some, but we’re not doing enough to control costs” for things like long-term care services and housing, he said.

But the low rates of understanding basic risk diversification, investment holdings and investment fees profoundly affect older Americans, said Olivia Mitchell, a professor at the Wharton School at the University of Pennsylvania who has extensively studied financial literacy.

“These patterns are worrisome because retirees are increasingly being held responsible for their own retirement security,” said Mitchell. “I’m concerned that low levels of knowledge in old age will have serious negative implications for retirement security.”

To confront the issue of overall financial security, not just awareness, Hillebrand said the federal agency is making progress with a new measurement tool aimed at financial educators working with students of all ages. It’s a series of questions asking about a person’s financial well-being.

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