Financial Literacy of Professionals Studied by First Command

Professional military personnel performed worse than civilians on a financial literacy test, in a growing disparity between those who serve the country and the general population, according to a new survey.

Officers and senior non-commissioned officers from all branches of the military received an average score of 57% on a quiz of their proficiency with money and investing – well below the 69% average among civilians and the lowest rating in the survey’s 11-year history, according to the First Command Financial Behaviors Index released earlier this year by veteran-focused wealth manager and service members First Command Financial Services.

Service members reflect an American adult population whose financial literacy rate have fallen in recent years. A decade earlier, regulars and the general population each answered an average of 6.9 correctly on nine First Command quiz questions. In the 2022 test, career military personnel scored 5.1 correct questions on average, compared to 6.2 for civilians. Some fintech entrepreneurs and financial advisors themselves aim to stimulate money education through innovation.

Soldiers often lose sight of financial matters or find no time to deal with them simply because “most people join the military to be part of a cause and to support a cause greater than themselves- themselves, and it’s to defend this country and all of our freedoms,” First Command CEO Mark Steffe said in an interview. their Thrift Savings Plan accounts gave them a higher match on their government contributions, but a lower overall pension, Steffe said.

“In a sense, it transferred the risk to the military, and it required them to be more informed about the decisions they make about their retirement,” Steffe said. “What we would like to see is for the military to enter into public-private partnerships. … We would love to see them contract that out and partner with private industry.

First Command is an independent wealth manager based in Fort Worth, Texas, with a bank, brokerage and RIA covering 600 advisors and $41.5 billion in assets under management. The company hired behavioral research firm Sentient Decision Science to conduct the survey, which impacted approximately 200 officers and senior NCOs with pay grades of “E5” or higher earning at least $50,000 a year and 300 other Americans between the ages of 18 and 70 with incomes from that level. The company’s tests aim to track a swath of “military-oriented Central America,” Steffe said.

Career military personnel participated in financial education programs in far greater numbers than the general population: at least 73% of military personnel reported having taken money training, while only 21% of civilians had done. Yet among this group, 47% of civilians answered at least seven out of nine questions correctly, and only 17% of career military personnel got seven or more answers. This year’s quiz covered topics related to inflation, long-term investing, banking, credit ratings and buying a home.

Service academies should add financial literacy to their courses for new service members, according to Cedric Edwards of Edwards Wealth Consultants, an Air Force veteran whose wife is also an Army veteran. the air. The Garden Ridge, Texas-based adviser’s family has two sons who are West Point graduates, one daughter who is a Naval Academy alumnus and another daughter who is currently an Air Force Academy cadet.

“I think the military needs to start a more in-depth financial literacy program,” Edwards said. “They’re basically at the Ivy League school level, but they don’t teach financial literacy.”

Since research has shown that family members of career military officers often make most, if not all, of the day-to-day financial decisions during deployments, counseling should also include wives and husbands, Steffe said.

“That leaves the military spouse to run the household and take care of the kids,” he said. “Much of this financial training is not for the spouse.”