Article originally posted on AdvisorPerspectives

April is Financial Literacy month, but all that elicits from the advice industry is a collective yawn.

Planners, especially those who are part of the Financial Planning Association (FPA) and are engaged in financial education, can change this. The key is to change the focus from imparting “book” knowledge to educating the public about the proper financial habits and ethos.

Launched by Congress in 2003, April is the month educators, firms, non-profits and government agencies highlight programs to make consumers more financially literate.

The Consumer Financial Protection Bureau (CFPB) says financial institutions spend $17 billion a year marketing, but only $670 million on financial education.

The FPA has long made financial literacy a priority. In 2022, the association reported a 212% increase in attendance in its literacy programs.

The FPA reported its chapters and members workshops, “offer consumers the opportunity to learn about financial planning, budgeting, investing, retirement planning, and other important financial topics.”

The standards for financial literacy focus on knowledge. The Council for Economic Education (CEE) updated its National Standards for Personal Financial Education in 2021 for K-12 education. The topics covered were earning income, spending, saving, investing, managing credit and managing risk.

What “knowledge” are high school seniors expected to learn? Hint: This course is not for the faint of heart.

The CEE course syllabus stated, among 14 segments, that “students will know” the following: factors that determine a person’s investment risk tolerance; the annual nominal rate of return; why inflation reduces purchasing power over time; factors that influence prices of financial assets; considerations for making diversification and asset allocation decisions, and much more.

But the outcomes of those courses are slim and hard to measure.

A 2020 paper in the Economics of Education Review noted one study that concluded, “Financial education has limited our ability to influence financial behaviors.” It stated that other studies found “improvements in measured financial knowledge” but did not “measure behaviors after leaving school.”

In sum, it stated, “These findings do not provide educators or policymakers a clear prescription for influencing the financial behaviors of young people.”

Loyola Law School professor Lauren Willis has reviewed research on financial education programs since 2009 and has published more than a dozen scholarly papers. In 2021, Willis questioned if more finance knowledge means better outcomes. She concluded, “It is not clear that the knowledge measured would have any effect on behavior or well-being.”

Willis offered several recommendations. One was on financial advice. Willis noted that financial advice is a service where individual decisions are key. But caveat emptor: “Financial advisors routinely give advice that favors their own interests over their client’s interests.”

The CFPB offers skills-focused education as an alternative to knowledge-focused education. In a 2018 paper, the core conclusions were, “The actions people take affect their financial outcomes,” and “financial skill” matters more than “general knowledge of financial facts” in affecting actions.

The upshot? According to the CFPB, “knowing how to do things” such as when one needs information, and where to find it and how to use it – matters more than knowing certain facts.

Research firm Hearts & Wallets specializes in saving, investing and financial advice research. Its report, Financial Wellness Behaviors that Build Wealth, confirmed this. The behaviors are no mystery. They distill to: Get insurance. Spend less than you earn. Minimize debt, maximize savings and investing.

Explaining those 13 words is easy; appreciating their force is hard. They are skills rooted in values, attitudes and habits that transcend clients’ diverse backgrounds.

Tim Ranzetta is a financial educator superhero. It’s his life mission. Ranzetta, co-founder of Next-Gen Personal Finance, said, “I was one of the fortunate few who had Depression-era parents who taught me to fear credit, love savings, get educated and serve the community.”

FPA planners are on the front lines of financial education. They can re-make it and they should. Teach more skills and fewer facts. Stress the power and role of values. Imagine if next year we heard applause instead of yawns from the advice industry.

Read the article on AdvisorPerspectives