Helping clients avoid the cost of financial ignorance

investmentnews.com:

Financial Awareness Day, observed annually on Aug. 14, promotes financial literacy and encourages individuals to take steps to improve their financial well-being.

In other words, Monday is the day when advisors can proudly tell their clients: “The more you know, the more you will make — and the less it will cost you.”

A recently released Allianz study showed that almost a third of Americans lack sufficient skills and knowledge to make sound financial decisions and that this ignorance costs the average household as much as $5,059 a year. Over a decade, this lack of awareness could amount to a deficit of $84,458 compared to households led by people who understand financial basics, the report said.

The study also showed that 58% of Americans have average financial literacy and only 10% demonstrate high financial literacy, which was roughly in line with the results in the majority of the other six countries surveyed.

Allianz surveyed more than 1,000 people in the U.S. and six other countries for the study, asking them a series of questions designed to test their understanding of financial basics such as interest rates, inflation, and investment risks and returns.

Dean Tsantes, a Vienna, Virginia-based financial planner at VLP Financial Advisors, believes a lack of financial awareness is a substantial part of the reason why two-thirds of Americans struggle to make ends meet and why 401(k) withdrawals are up nearly 40% from a year ago.

“If someone like a financial planner sat down with them years ago and explained the value of changing their lifestyle and spending habits, then they would not only be better off financially, but savvier when it comes to finances and where their money is going,” Tsantes said.

Kelly Famiglietta,