It's never too early to begin educating people about financial literacy, believes Annamaria Lusardi, academic director of the Global Financial Literacy Excellence Center at the George Washington University School of Business.
“When the tooth fairy comes” would be a good starting point, said Ms. Lusardi, speaking on a panel about financial literacy at the recent Pensions & Investments' Global Future of Retirement conference in Washington.
Early, sustained efforts to improve financial literacy is a global challenge, she said, because “financial literacy is at a crisis level.”
Financial literacy was just one of several global issues discussed at the conference. The impact of immigration on retirement systems as well as the reconciling of health care spending and retirement spending by sponsors also occupied the spotlight.
Ms. Lusardi said young people “are a particularly vulnerable group,” for which financial literacy is important given the problems with student loans in the U.S. and rising education costs in other countries. “Many display an inadequate level of financial literacy,” she said.
Ms. Lusardi advocated the offering of financial literacy programs in three key venues — school, the workplace and the community, such as libraries and museums.
At the workplace, benefits managers must make sure they understand the different demographics within their companies and organizations — and tailor specific messages for specific groups, said Dan Iannicola, president and CEO of The Financial Literacy Group, Washington.
“Before I know what you need, I must know who you are,” said Mr. Iannicola, adding “one size fits none.”
Benefits managers need to recognize that they must incorporate more than just retirement information in their communications with employees. Budgeting, credit management, college financial aid and mortgages are just some of the components of a holistic approach to financial communication and literacy, he said.
Other speakers at the GFOR conference addressed a different type of global challenge — the impact of immigration on retirement systems.
Steven A. Camarota, director of research at the Center for Immigration Studies, said immigration “does not have that big an effect on changing the ratio of workers to retirees. That doesn't mean it is bad — but just (that) it isn't going to make that much difference.”
The average age of a native U.S. citizen is 36, while the average age of an immigrant is 43, he said. “If you want to use immigration to help retirement, you need selective immigration,” he added. “Oddly, the more skilled immigrants you get, the lower fertility you get.”
The value of “positive immigration” mean an influx of “skilled, highly educated” people, said Ed Farrington, executive vice president, retirement strategies-U.S. distribution, Natixis Global Asset Management. The presence of these immigrants “certainly has created alpha for certain industries,” he said.
Another global challenge for benefits' managers is the collision between spending on health care and spending on retirement.
“Around the world, health and retirement have grown up separately” within companies benefits' management, said Alison Borland, senior vice president and defined contribution and head of defined contribution at Aon Hewitt, Lincolnshire, Ill.
Employers must emphasize the “total well-being” of participants in communication and education to employees,” she said. “We still have a long way to go” in taking a holistic benefits management approach to health care and retirement. ???
