A lack of financial literacy can be costly. A recent study conducted by the National Financial Educators Council found that the estimated average amount of money that lacking knowledge about personal finances cost people was $1,819 in 2022.
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That’s because a lack of financial understanding can lead to some major money missteps. With that in mind, here’s a look at the mistakes that financially literate people never make.
Not Saving Enough for Retirement
A separate survey conducted by Ubiquity Retirement & Savings found that there is likely a correlation between not being financially literate and not saving sufficiently for retirement. The survey found that 59% of Ubiquity’s plan participants rated their level of financial literacy as medium to low, and a very similar percentage — 58% — said they were not saving enough for retirement.
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Making Costly Investment Mistakes
Financially literate people have a better understanding of investment basics, so they are less likely to make costly mistakes in this area of their finances.
“Without an understanding of how to invest, [people] may not be investing in the right funds or portfolios that can help them earn more with their savings, especially amidst times of market volatility,” said Andrew Meadows, SVP at Ubiquity Retirement & Savings.
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Not Taking the Company Match
When it comes to employer-sponsored retirement plans, financially literate people are sure to take advantage of any match offered.
Conversely, “due to poor financial literacy, employees may miss out on taking full advantage of the company’s 401(k) match,” Meadows said.
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Not Talking Openly About Their Finances
One of the best ways to improve your financial literacy is to talk about money — but people who lack financial literacy often don’t do this.
“In my experience, due to the shame and worry of not saving enough, many individuals don’t talk about their finances with their family or friends,” Meadows said. “Without sharing or talking about these things, there’s less of an opportunity to learn what others are doing that might help motivate them.
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“To compound the issue, these individuals aren’t looking for financial advice from professionals, which also limits financial literacy,” he continued. “I always advocate for talking more about saving strategies with trusted folks in your community, whether it be older relatives, spouses or financial advisors.”
