From finance blogs and TV programs to paid classes and unsolicited comments from friends and family, it can sometimes seem like there’s almost too much financial advice to be had.
But not all financial information is created equal, nor is it available for everyone. People who are wealthy and well-educated can afford to hire professional strategists and go on to pass their financial acumen to their kids. On the other hand, people with fewer social privileges face high barriers to entry when it comes to financial literacy. In particular, studies have shown that women and people of color suffer most from a lack of access to financial education.
In order to solve the problem of financial education inequality, it’s important to understand the current landscape. We wanted to find out exactly where Americans are getting their financial advice, so we ran a survey of over 1000 people to find out.
Here are some key takeaways:
- Only 22 percent say they utilize a professional financial planner to help make decisions about handling their money
- 30 percent rely on their own research to make their financial plans
- 16 percent rely on financial advice passed down from their parents
Googling for Financial Advice Is on the Rise
With so much information now available online, it’s certainly possible to become financially literate on your own. According to our survey, almost a third of respondents opt to make money decisions by searching Google.
This confidence in self-education suggests an increased possibility for equality across demographics, since the primary methods of gatekeeping — social intimidation and cost — don’t apply to people doing their own online research.
However, the availability of information doesn’t mean anything if people can’t think critically to use it accurately. In a 2016 study by Stanford University, researchers found that students of all ages, even highly educated college students, often mistook false resource pages and paid advertising as reliable information.
If a third of people choose to forgo formal financial education, it’s important they have access to basic financial information somewhere in order to adequately teach themselves. In situations where a lack of education stands in the way of financial literacy, free and low-cost programs remain a necessary tool in the effort to improve people’s money skills.
People Aren’t Spending Money on Professional Financial Advice
Financial advisors can be cost-prohibitive, which is why it makes sense that less than a quarter of people surveyed employ a professional for help making money decisions. At a time when half of Americans live paycheck to paycheck, it might seem concerning that so few people pursue professional financial advice on how to handle their debts.
But though Americans undoubtedly do need a solid financial education, recent research suggests that a professional might not actually be the most effective way to get it. In a 2018 study of over 450 participants, researchers found that people who worked with a peer to learn about investments made better financial decisions than those who got advice from an authority on the topic. The study’s authors observed that the process of working through a problem with another person led people to use more critical thinking and problem-solving skills, ultimately leading them to a more beneficial decision.
In other words, figuring things out with a friend — even if you’re both financial amateurs — might actually lead to smarter money decisions than shelling out cash for professional advice.
Money Secrets Are Passed Down to a Privileged Few
According to our survey, only about 16 percent of people get their financial advice from their parents. Past surveys have typically reported higher numbers — this 2014 report found 33 percent of millennials get their financial advice from their parents, while this 2017 survey found that 65 percent of Americans trust their father’s financial advice.
Decreasing reliance on family for help handling money would be a positive sign, since it means financial knowledge is more accessible in places like the internet and media, which offer more universal access regardless of a person’s connections or background.
Bottom Line: Financial Education Remains a Necessity
As more avenues for acquiring money advice become available, it’s important to equip people with the tools they need to achieve financial literacy. A lack of access to solid financial education leads people into costly debt mistakes that can only be repaired with professional help. This also puts them at risk of being unable to pay for resources in an emergency, forcing them to make dangerous borrowing decisions that can badly damage their credit.
By spreading financial knowledge, we ensure that more people are able to make sound decisions and avoid costly mistakes that damage their financial record. And by offering greater access to financial education, we can also help people who have made those mistakes learn how to best repair their credit, erase past debt mistakes and move forward with a clean slate.
This study consists of one question conducted using Google Surveys. The sample consists of no less than 1,000 completed answers. Post-stratification weighting has been applied to ensure accurate and reliable representation of the total population. The survey ran in March 2019.