Meridian Blog

The month of April feels like a breath of fresh air to our family (figuratively and literally). Spring brings longer days, warmer temperatures, beautiful scenery, and the chance to celebrate new life at my dad’s farm.

The month of April is also very special as it is Financial Literacy month!

In today’s fast-paced world filled with information and opinion overload, financial literacy is more important than ever. A foundational level of financial literacy is essential for understanding how money works and how to make informed investment decisions. With our lives constantly changing, the number of “plates” we tend to juggle, and an ever-changing financial landscape, financial decisions can feel overwhelming.

A survey from Janus Henderson Investors revealed that while most investors can correctly answer basic financial literacy questions on topics such as compounding interest, inflation, and diversification, many investors overestimated their capabilities when self-assessing their financial aptitude. This survey showed that financially literate investors were actually prone to overconfidence – an emotional bias that can have significant implications for their financial outcomes.

That’s where financial advisors come in. Advisors are uniquely positioned to help clients turn knowledge into sound, unbiased decision-making.

What is Financial Literacy and Why is it Important?

Financial literacy empowers individuals to make informed decisions about their money, leading to greater financial stability and long-term success. This includes knowledge of budgeting, saving, investing, insuring, debt management, and retirement planning…phew!

At Meridian, we know that the financial services industry is filled with complex terminology, acronyms, and concepts that can sound like Latin to be totally honest. But it doesn’t need to be that complicated.

The key components of financial literacy can mostly be summarized into 6 main categories:

1. Budgeting and Expense Management
2. Saving and Investing
3. Debt Management
4. Retirement Planning
5. Insurance and Risk Management
6. Financial Products / Concepts

Financial Literacy Trends

Unfortunately, traditional education does not cover all components, and sometimes even the most practical aspects of managing money are overlooked. However, on the flip side, financial literacy (or illiteracy depending on if you’re a glass half-empty kind of person) is holding somewhat steady based on data from the 2024 TIAA Institute’s P-Fin Index.

The index explores the functional areas of borrowing, savings, consuming, earning, go-to info sources, investing, insuring, and comprehending risk.

The results indicated that Americans appear to be most comfortable with financial knowledge around borrowing, saving, and consuming and the least confident around comprehending financial risk.

While having a strong understanding of the financial literacy principles is important, it’s not always enough on its own. The world of finance is constantly evolving, and even those with a strong understanding of personal finance may need expert advice and help developing a disciplined approach to navigate changing markets (ahem… this year) or complex financial situations and life changes.

Financial Advisors and Financial Literacy

Not only can advisors help clients mitigate the effects of overconfidence, as mentioned earlier, but they can also play a role in guiding clients toward a deeper understanding of financial principles while addressing emotional biases by providing unbiased advice based on your best interests. They help you avoid emotional decision-making during market swings, focusing on long-term strategies rather than short-term market noise. Their advice can be especially helpful in times of financial uncertainty.

Source: “Market Volatility Reference Guide”, March 2025, Orion Portfolio Solutions, LLC

While this at times sounds easier said than done, the benefits of combining financial literacy and partnering with a trusted financial advisor are plentiful.

1. Stronger Money Management Skills: Financial literacy allows you to make more informed choices in your day-to-day financial decisions, putting you on the path to better money management.
2. Personalized Financial Guidance: While financial literacy helps you understand the basics, a financial advisor brings specialized knowledge to the table. Advisors tailor their strategies to your unique financial goals, whether it’s saving for retirement, buying a home, or building an investment portfolio.
3. Confidence and Peace of Mind: Having a financial advisor by your side can help ease the stress of managing your finances. They can guide you through complex financial decisions, ensuring you’re on track to meet your goals. When paired with financial literacy, you can approach your finances with confidence, knowing you’re well-informed and supported.
4. Strategic Goal Setting and Planning: Financial literacy gives you the tools to set and understand your goals, but an advisor helps you turn those goals into actionable plans. With expert advice, you can prioritize your objectives, identify potential roadblocks, and create strategies to achieve financial success.
5. Protection and Long-Term Success: Financial literacy helps you recognize potential risks, but a financial advisor can offer strategies to protect your wealth and plan for the future. Whether it’s through tax strategies, retirement planning, or investment diversification, an advisor ensures you’re set up for long-term financial security.

By combining your own financial knowledge with the expertise of a financial advisor, you create a powerful partnership that can help you reach your financial goals. The key is to continue learning and stay informed about your financial health while utilizing professional advice to make sure your financial plan is as effective as possible.

In light of all that is going on in the markets and the world, we are here for our clients to focus on reaching your financial goals as we continue to educate ourselves and one another in order to make the best decisions in this ever-changing landscape. Hang in there.