Financial literacy is not the problem nor the solution.

There is a general tendency to blame poor financial habits – debt, failure to save and invest, living paycheck to paycheck, etc. on a lack of financial literacy. I have done it often. 

However, I have second thoughts. The lack of financial literacy is not the problem. Oxford research found financial education improves knowledge but has much weaker effects on actual behavior because psychological forces dominate. They are the biggest factor affecting financial decisions.  It’s not a matter of knowing, but of doing. 

Immediate rewards feel far more valuable than larger future ones. A dollar today often outweighs $1.10 or more later in people’s minds. Retirement or long-term security feels abstract and distant—almost like it belongs to a different person—so the pain of forgoing a purchase now outweighs the abstract future benefit.

Spending is often driven by emotion (stress relief, status, boredom) more than calculation. Habits lock in automatic spending. 

Shame about money leads people to avoid looking at balances, bills, or plans, which lets problems compound. Financial stress itself reduces the mental capacity needed for long-term planning.

Losses feel roughly twice as painful as equivalent gains feel good. This makes people reluctant to invest or to cut spending in ways that feel like a loss. 

Overcoming the psychological challenges may not be easy, but after breaking those barriers practical information is needed, but not necessarily formal education. 

If a person is motivated, it is easy to obtain help with financial matters. We are beyond the time when “I don’t know how.” “Nobody showed me how.” is a valid excuse. Actually, if I am honest, I never saw either position as a valid excuse. 

I embarrass Connie all the time by asking questions. On Cape Cod we stopped in a glass blowing shop and a ceramic store. I simply had to ask how they created what they did. Why this way or that, etc. etc.  Connie on the other hand, said I was bothering them asking questions not unlike some of the criticism I receive on HD when I can’t accept an initial response. However, the people I questioned enjoyed sharing their knowledge and if I ever take up glass blowing I know where the powered glass comes from-Canada. 

During my working years I learned by asking endless questions of pension and insurance actuaries, tax lawyers, financial planners, graphic designers, etc. 

In 2026 learning about financial matters is pretty easy. To test my theory I asked several AI tools some basic financial questions. For example, 

How can I start investing?

“Getting started with investing is easier than you might think. You don’t need thousands of dollars to begin. You can start with a small amount, learn as you go, and build wealth over time. The most important thing is to invest wisely, understand the risks, and be consistent. Here’s how I’d recommend getting started” … and the response continued with simple advice. 

I also asked, “What is compounding interest?” and  “What is diversification?” The replies were accurate and easy to understand. 

The issue is how do we motivate people to act, to get past psychological barriers that prevent prudent action on finances. Learning how and what to do is the easy part…just ask.