Americans are financial illiterates. Right? Know the difference between a stock and bond? Maybe. Between a bond price and bond yield? Now, c'mon.
It's widely assumed—and supported by surveys of average Americans—that financial illiteracy is at the root of our inability to spend and to use credit wisely, and to save enough for milestones. But could the real problem be that we're drowning in too much Wall Street jargon?
In this new series, Open to Debate, we ask individual investment experts to weigh in on everyday financial issues, beginning with the most basic: How low is the American financial IQ? And is it because of a lack of financial education or a glut of marketing literature discussing alpha and beta? (For work stress relief, we also let them vent about their least favorite bits of financial jargon.)
Ed Gjertsen II, vice president of Mack Investment Securities, CFP
America is not devoid of financial literacy; I believe we are drowning in it. There is enough information for individuals to make decisions. The challenge is that the financial planning profession needs to do a better job of connecting the information to the individual in a straightforward, jargon-free zone.
It is often stated that America has an obesity problem, yet I am pretty confident that most people know or have heard of the four major food groups and understand that if you eat less and exercise more you may become more healthy.
One way to develop good financial health is to consume less. Consumption is at the root cause of most issues. Too much consumption can be detrimental to one's health, whether physical or financial. It comes down to choice: to buy or not to buy. Conscious consumption (not in the social sense) should be an important element in our day-to-day decision-making. We swipe without much thought.
(Read more: The new retirement age is ... never)
Gjertsen's least favorite financial jargon term?
I strongly dislike this word because it resonates of diet. Diets are restrictive and guilt ridden. I would prefer "eating plan" or in this case having people embrace a "spending plan." If I watch what I eat and plan my meals but every so often break down to enjoy my milk and cookies (personal favorite), I shouldn't feel guilty about it. If I develop a spending plan and consciously know where money is flowing, I shouldn't feel guilty about falling off it. Less guilt, more flexibility but, most importantly, treating people like the intelligent adults they are.