How Do You Rate Your Personal Finance Knowledge?

According to a 2023 Pew Research Center Survey, just over half of the U.S. adult population reports knowing a great deal or a fair amount about personal finances. One-third say they have some knowledge of personal finances, while over one-tenth say they know little or nothing.

Focusing on older Americans, most over 50 feel pretty confident about their money management skills. 63% of older adults (50+) say they know a great deal or a fair amount about personal finances. This is significantly higher than the 45% of younger adults (18-49) who say the same.

But confidence in general money matters may mask a critical weakness. While three-quarters of Americans feel they know how to find their credit report and more than half can create budgets or tackle debt, only 27% feel confident creating an investment plan to build wealth.

That percentage barely shifts across age groups, suggesting even financially confident seniors struggle with this retirement-essential skill.

Gaps in financial knowledge

Older adults often feel financially savvy because they’ve mastered everyday money tasks through decades of experience, such as paying bills, managing debt, and monitoring credit. These skills come naturally after years of practice.

Investment planning demands different expertise entirely. You need to understand market behavior, asset allocation, how risk tolerance should shift with age, and products like annuities or target-date funds. Unlike budgeting mistakes you can fix next month, investment errors in your 50s and 60s leave little recovery time before retirement.

The Pew findings reveal another concern: only 21% of Americans feel confident handling every financial task surveyed, compared to 40% of upper-income households and 13% of lower-income Americans. Even financially comfortable older adults have substantial knowledge gaps.

Learning about finances

Nearly half of financially literate Americans say they learned about personal finances from family and friends. That far exceeds any other source. The internet ranked second at 33%, followed by college at 27% and media at 24%. K-12 schools trailed at 19%.

This dependence on informal education may create problems. Family financial advice could reflect outdated strategies or different economic circumstances. Investment tips that worked for your parents in the 1980s won’t necessarily succeed in today’s market environment. Well-meaning friends might share advice based on incomplete understanding or personal biases.

The generational learning divide is also significant. Adults under 50 are far more likely to have learned from online sources. While younger generations routinely access a wider range of financial perspectives online, the quality of information available varies significantly.

Investment knowledge matters to retirees

For those approaching or already in retirement, weak investment planning skills have immediate consequences. Without solid strategies, retirees risk:

• Running out of money due to overly conservative portfolios
• Taking dangerous risks trying to catch up on savings
• Falling victim to investment scams targeting seniors
• Missing tax-efficient withdrawal strategies
• Failing to diversify properly across asset types

Today’s retirees or near-retirees face challenges that their parents never encountered: longer life spans, eroding pensions, increasing healthcare costs, and volatile markets. They need sophisticated investment planning more than previous generations, yet most lack confidence in precisely this area.

If you have more than $100,000 in savings, now might be the time to get some advice from a pro. SmartAsset offers a free service that matches you to a vetted fiduciary advisor in less than 5 minutes.

Building better investment knowledge

Recognizing your investment planning limitations is the first step. Being skilled at monthly budgeting doesn’t automatically make you an expert in retirement portfolio management.

Consider these practical steps:

• Get professional help. Financial advisors provide personalized investment strategies. Consider it tuition for a vital life skill you can’t afford to skip. WiserAdvisor is another free service that will match you with a pro in your area if you have over $100,000 in investments.
• Use free resources. Many employers offer retirement planning workshops. Libraries host financial programs. The SEC and FINRA publish legitimate investor education materials.
• Focus your learning. Rather than trying to master all investing overnight, start by understanding your own retirement accounts. What are you invested in? What fees are you paying? How should your allocation change as retirement approaches?
• Verify advice. Don’t rely solely on that friend who claims market expertise. Cross-check guidance from books, reputable websites, and professionals before making decisions.
• Check your confidence. The Pew data shows older adults feel more financially knowledgeable overall. That confidence might prevent seeking help when it’s most needed. Acknowledging knowledge gaps enables growth.

The path to better investment planning

America’s investment planning knowledge and confidence crisis extends beyond individual struggles. It is a societal challenge with widespread implications. As traditional pensions disappear, retirement security increasingly depends on personal investment decisions most people don’t feel prepared to make.

While Americans await systemic improvements, such as enhanced financial education or simplified retirement plans, individuals are wise to act now. That might mean admitting you need investment planning help, even after successfully managing other finances for decades.

Financial literacy can grow throughout life and retirement. The key is understanding that general money confidence doesn’t equate to mastery of every financial skill, especially investment planning, which can determine whether your retirement dreams become a reality.