April 2021 is Financial Literacy Month. Now in its eighteenth year, the month has kept its focus on the original goal, as stated in the original 2004 Senate Resolution:

“to raise public awareness about the importance of financial education in the United States and the serious consequences associated with a lack of understanding about personal finances.”

President Biden has also proclaimed April to be National Financial Capability month, saying:

“High-quality financial education should build on and respond to people’s individual strengths, circumstances, and needs in order to help them work toward their own unique goals.”

What is “Financial Literacy”?

There is no single measure for financial literacy. Google “financial literacy quiz”, and you could spend an entire day taking tests.

For example, the National Financial Educators Council has created a half-dozen quizzes that ask general awareness questions on a wide array of topics (including standard and advanced versions).

About 59% of more than 60,000 test-takers passed the standard test referenced above, and the average score was 68%.

But what makes a particular personal finance topic relevant — paying off debt, owning a home, planning for retirement, and more — depends on the circumstances each person faces and the tools they have at their disposal. These, of course, can vary.

So, while quizzes like these are a fun way to gauge general awareness about financial topics, they aren’t the best measure of literacy on an individual basis. What, then, does it mean to be “literate?”

Bridging the Gap Between Knowledge and Action

Financial knowledge can equip a person to make more informed decisions. But without action, knowing about personal finance adds nothing to a person’s net worth. A person who saves 3% of their salary in a 401(k) but who isn’t confident they know how a 401(k) works is probably better off than a person who knows every detail about 401(k) accounts but who has no savings and has no plan to start.

In a sense, a person achieves literacy when they implement financial knowledge into their life in a tangible way. It’s similar to learning a language: Memorizing vocabulary words on flash cards is an important step in learning, but it takes more than a vocabulary to have a conversation or become fluent.

PERA offers members a variety of tools and resources to bolster financial literacy. One way to help understand what’s available is to think about each resource as either education-oriented or action-oriented. A few examples are shown below:

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The Importance of a Plan

Financial literacy is important. While it takes more than simply memorizing financial principles to reap the rewards, having a baseline of knowledge is an invaluable part of becoming financially secure. Not surprisingly, a lack of financial knowledge is a common barrier to getting started. 

So in recognition of Financial Literacy Month, go ahead – take an online quiz. Test your knowledge against others. But when you’re done, go a step farther. Strive for true literacy. Keep learning, and find ways to apply what you know.