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A Fresh Take on the Term ‘Financial Literacy’

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What You Need to Know

  • Many lower- and middle-income Americans do not see working with a financial advisor as an option.
  • We need to rethink the language as we reassess the objectives of the financial literacy movement.
  • We should give advisors the same faith as doctors to help clients design a financial plan that best suits their needs.

A recent CNBC + Acorns Invest in You survey found that 52% of participants attested to being under more financial stress now than they were one year ago; with 32% of lower-income Americans stating that they are under “much more” financial stress now compared with one year ago. 

In the financial services industry, when we see those numbers, we believe that a financial advisor is a remedy to that stress. But the truth is, for many Americans, that’s not even seen as an option, especially those in underserved communities. The reason behind this isn’t a lack of financial literacy, it’s a lack of awareness that financial advice exists. What does the data tell us?  

  • Magnify Money surveyed 1,500 Americans in 2021 and found that only 30% had worked with an advisor and 42% think advisors are only for wealthy people. 
  • A Fidelity survey in 2021 found that just 14% of women said they knew a lot about saving and investing, and only a third of women feel confident in their ability to make investment decisions.  
  • A Brown University study of 50,000 families revealed that children’s habits form around 9, and stick. Families of lower economic status (which are often in minority communities) are less likely to model strong habits for their children when it comes to managing money due to the lack of resources. 

Does Financial Literacy Close the Wealth Gap?  

It’s easy to see how women, lower- and middle-class Americans, and communities of color are systemically placed at a disadvantage when it comes to gaining the financial wisdom needed to build generational wealth. 

Despite its intended positive connotation, the term “financial literacy” can have the opposite effect. Financial education and elevated knowledge of available advisory services in low-income communities is what we need, not the pursuit of financial literacy. Our country needs affordable financial advice and to put efforts into increasing awareness for people of all ages. 

To us, it’s counterintuitive to turn to underserved communities and ask, “how would you access your financial literacy?” Many people are barely even aware of financial advice as a service or profession. Being financially literate is great, but when it comes to changing the complexion of who possesses the wealth of our world and who doesn’t, it’s ahead of its time.

We Don’t Expect Everyone to Be Medically Literate.  

When you are going to a doctor, you do not feel the need to be medically literate. You wouldn’t learn how to do surgery and then perform the operation on yourself. 

Sure, you might want to understand what is happening with your body and research the prescribed treatment, but you don’t feel the need to be proficient in medicine to see a doctor. You trust the doctor to leverage their years of knowledge and medical practice to identify a solution, and they trust you to express what you need to the best of your understanding. 

There’s a reason we don’t say “medically literate.” There are medical professionals that you turn to for your health concerns. Yet we have an entire month dedicated to “financial literacy.” Shouldn’t we give financial advisors the same faith as doctors to effectively help you design a financial plan that best suits your needs? 

What Needs to Change?  

Our industry is just one part of the puzzle, but money — no matter how much of it you have —  touches the lives of everyone. When it comes to financial literacy, we need to rethink the language and take a step back as we assess the objectives this movement hopes to achieve. 

If the goal is to get more people to feel confident about making investment decisions and planning their financial lives, then we first need to spread the message that financial advice and guidance is available and attainable to the people who need it most.  

The idea of taking control of your financial life should be empowering and collaborative — and done in a way that allows greater wealth in diverse communities to flourish in the long term. The sentiment behind the financial literacy movement is well intended, but we deeply believe that financial education is best served alongside personalized financial advice.  

So, instead of pushing people to be financially literate, let’s focus instead on empowerment through giving people grace to learn at their own speed; on increasing awareness and access to financial advice in underserved communities; and on reminding people that help is out there to ease their stress and make them feel financially capable.  

Pictured: Dasarte Yarnway (left) and Emlen Miles-Mattingly

Dasarte Yarnway and Emlen Miles-Mattingly are co-founders of the Onyx Advisor Network, which helps historically underrepresented financial advisors start, scale, and sustain their practices. Follow them on Twitter:  @DasarteYarnway and @emilesmattingly. 


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