Diversity & Knowledge
Diverse communities have different knowledge gaps
Among diverse groups, there is one universal truth: financial literacy is low. Respondents of all races and ethnicities have low financial literacy scores in all retirement-related knowledge areas, with only one topic averaging above 50%: inflation. This indicates how much experience matters—respondents tend know more about topics that directly impact their daily lives.
Similarities Prevail, But Differences Emerge
The underlying scores reveal areas in which targeted financial education may make the greatest impact:
- Black respondents (37%) and others (40%) outperform Hispanic (35%) and white (32%) respondents on life insurance questions—although all of these remain low.
- White and Other respondents score significantly (in many cases, 10 or more percentage points) higher than Hispanic and Black respondents in areas having to do with day-to-day expenses, such as inflation, housing, and Medicare.
- All groups perform similarly on the topic of retirement income, with scores ranging from 28% to 33%.
Long-term care, investments, and annuities were by and large the bottom three areas in terms of knowledge, with lower scores reported across nearly all groups. With the rising emphasis on the importance of preparation for retirement in these areas, this should be of particular concern to financial services professionals.
You Don’t Know What You Don’t Know
Another concerning trend from our study is that despite generally lower scores than white respondents and Others, Black and Hispanic respondents were more likely to self-assess as being more knowledgeable in almost all areas—directly contradicting our knowledge assessment results based on the financial literacy quiz. In other words, these two groups overestimate their financial knowledge in key areas, and therefore, may not feel they need to seek guidance from financial professionals.
Clearly among diverse communities, the problem of increasing financial literacy must be considered not just a knowledge issue, but an awareness issue as well. With social media and the 24-hour news cycle, as well as a near-uncountable number of public sources for financial “advice” playing an ever-growing part in our lives, people of all backgrounds often don’t know what they don’t know—and that crisis of misplaced confidence can hurt them later in their lives.
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