How Plain Language Can Help Address Financial Illiteracy

America has long been a land of contradictions. This is especially true when the subject is money, as shown by two recent surveys . One found that 88 percent of Americans fear we are in the midst of a retirement crisis that will impact their lifestyle while another concluded that 74% of retirees are living comfortably. Also good news for retirees, a 2016 Census Bureau report shows that in 2015 just 8.8 percent of people 65 and older were impoverished, compared to 19.7 percent of children under 18 and 12.4 percent of 18- to 65-year-olds.

Obviously, there’s a huge gap between perception and reality. A big part of this disconnect is due to the fact that a lot of Americans really don’t understand investing, compound interest, financial planning or even the difference between a stock and a bond. And are often afraid to ask.

A Nation of Financial Illiterates


“Consumers are intimidated by the subject,” said Ric Edelman co-founder and executive chairman of Edelman Financial Services in a recent Bloomberg podcast. “They don’t have any background in it. Most people go through their entire K-16 education without ever having taken a personal finance class. Their parents taught them nothing about money, their employers teach them nothing about money and they’re illiterate. We have a nation of financial illiterates. Every study tells us this; that ordinary Americans can’t pass a basic personal financial literacy class or test.”

Edelman is right on the money, especially on that last point. The firm Financial Engines reports that 94 percent of Americans failed to pass its 11-question test composed of basic financial questions. (I have to admit I only got 8/11 right, making my grade 72.7 percent. That’s a passing score, but pretty embarrassing for somebody who’s been covering the financial space for 15 years.)

Money Doesn’t Come With Instructions


Part of the problem is that financial topics are confusing and, according to Edelman, Wall Street wants to keep it that way so that people will continue buying their high-priced, commission-based investment products . That may be true, but it’s probably only part of the problem. There’s also the issue of financial professionals and their clients speaking different languages, although they may both be using English.

In any profession there’s a tendency for those on the inside to resort to jargon and insider short-hand when they speak to each other. But that same approach doesn’t work to someone outside that circle.

In the Bloomberg interview Edelman said “Money doesn’t come with instructions,” which is why he started his firm with the idea of teaching people about money, about the difference between a stock and a bond and then helping them to make informed decisions about how and why they should invest.

The success of Edelman’s business model—over the last 30 years his firm has grown from Ric and his wife Jean to include 170 advisors in 42 offices managing more than $16 billion in assets for more than 30,000 investors—shows that there’s something to be said for speaking to people in language they understand and teaching them what they never had a chance to learn in school.

Hope for Financial Literacy


Currently, only 17 states have some mandated financial literacy curriculum for students in elementary or high school, but that is changing. There are currently bills under consideration in a number of states including Pennsylvania and Kentucky to rectify that. And even in those states that have not yet taken formal steps, some school districts are already sponsoring programs.

For example in California, for the last two years Bay Federal Credit Union has sponsored the “ Bite of Reality ” simulation at Santa Cruz High School, which has made the program mandatory for graduating seniors. Participants are given a virtual occupation, income and family situation, as well as a spending plan, checkbook and check register to track their expenses. They then have to budget for housing and utilities, transportation, groceries and dining, entertainment, child care, household needs, clothing and personal care, and shopping. Any student with $100 or more left in their account at the end of the course is entered into a prize raffle.

Americans will feel more secure about their futures and better prepared to meet them when we as a nation become more financially literate . In the meantime, whatever business you might be in, take a tip from Ric Edelman and learn how to talk to your clients in language that they understand.

To help you on that path, let’s close with some advice on making sure your message is being heard.

Related: How Financial Firms Can Use Content to Build Trust

Five Tips for Getting Your Point Across


Know your audience. Do they have the vocabulary to understand your message?

Keep it simple. Use analogies that compare the point you’re trying to make to something the person already understands.

Use everyday language. If you’re not sure the person you’re speaking to will know the meaning of a word—don’t use it.

Sometimes a technical term is the only way to say something, but make sure you explain what it means.

Tell a story. Storytelling is the essence of good communication. If you have a good story that illustrates what you’re trying to say, and resonates with your audience, there’s no need to fall back on jargon and buzzwords.