Americans with low financial literacy aren’t just at risk of losing money they may not even realize they’re losing. Research shows they may also be paying for their time.
U.S. adults with the lowest financial literacy scores on the TIAA Institute’s Personal Finance Index spend an average of 13 hours a week thinking about and dealing with personal finance issues, according to research released June 1 by the TIAA Institute. People with the highest scores on the TIAA test spend an average of about four hours a week handling money.
The difference is almost a full working week, time that everyone would probably want to spend on different things. But for people who are stuck in a cycle of always thinking about and managing their money, reclaiming time isn’t just about learning the kinds of things that might help improve your financial test scores.
First, there’s a very likely correlation between people with low financial literacy and people facing financial insecurity, says Christine Benz, director of personal finance and retirement planning at Morningstar.
She says people who spend more time with money may be trying to make ends meet, for example by moving money around, dealing with creditors, or managing bills. “The root cause seems to be probably scarcity,” she says.
And, as it turns out, studying the ins and outs of finance alone won’t remove financial tasks from people’s weekly schedules, says Doug Boneparth, certified financial planner and founder of Bone Fide Wealth.
“Most stress doesn’t necessarily come from complexity. It actually comes from open loops, unanswered questions, unautomated tasks, unplanned decisions, and it’s always creating this low-grade anxiety noise,” he says. “So what’s really important is not to know more, but to close these loops.”
Here’s how he and other financial experts argue it should.
Prioritize financial buffers
Financial experts generally recommend building an emergency fund large enough to cover three to six months’ worth of living expenses, but Benz acknowledged that this can be difficult, especially with competing financial priorities.
But if you’re stuck in a cycle of constantly worrying about your finances, you should save at least some money every month for emergencies. She says she has one money task on her to-do list.
“Creating an emergency cushion and putting it in front of other financial goals has huge benefits in terms of peace of mind and is very likely to save you time from financial activities that require you to move money around,” she says.
The logic here is simple. By building a cash buffer, you won’t have to spend time worrying that you’ll end up shorting rent or missing a credit card payment because of a flat tire or a trip to the doctor.
Automate and simplify as much as possible
If you want to limit the time you spend managing your money, the “low-hanging fruit” is to automate the way your money moves, says Bonepers.
“You can eliminate human time spent making decisions,” he says. To the extent possible, “we automatically pay everything, including bills, subscriptions, and debt payments. This is a one-time setup and requires no weekly maintenance.”
Start by setting up automatic transfers from your checking account to your emergency fund, Benz says. Once you have a comfortable cash cushion and are sure that your account will not be debited, you can add monthly bills. The goal, experts say, is to ultimately have money available for all your financial goals, like saving for retirement or tackling debt, without ever seeing it come in or out of your bank account.
“If you’ve never seen it, you don’t have to make up your mind,” Vonepers said. “It’s already been done.”
It also saves time by consolidating the number of accounts you need to work with, Bonepers says.
“Having too many accounts or having too many credit cards open is just one more thing to check, one more thing to reconcile, one more thing to worry about,” he says.
To better manage the accounts you own, Boneparth recommends signing up for a service that links your financial institutions and gives you a holistic view of your spending, savings, investments, and debt.
“There are a lot of great apps out there that give you one view of everything with one login, one solid snapshot, and you can get it all done that way,” he says.
Make the most of your educational resources
There are limits to what you can do on your own. Eventually, you’ll run into a financial situation that no amount of emergency savings or automation can adequately prepare you for.
If this situation arises, it is wise to seek help and entrust your time to professionals. This may be easier and cheaper than you think.
“Financial education is evolving and high-quality resources are becoming available,” said Surya Kolli of the TIAA Institute, with particular emphasis on resources available through employers. “Take advantage of financial wellness resources, retirement plan matching, and education programs provided by your employer, because these tools exist to support financial literacy.”
You may also be able to find financial professionals, such as certified financial planners, through pro bono events in your community, Benz says. But make sure the advisor isn’t just there to flog the service, she added.
“It can be difficult to tell who’s there with good intentions and who’s there to sell you something, so you have to be careful,” she says. “But some of these events can be a great way to get free financial advice from experts.”
And if you want to better manage your money, Corli says, don’t try to learn everything about money at once. Instead, focus on financial aspects that are relevant to your life stage, she says. That means younger people can make changes by focusing on their savings habits and long-term investments, she says, while older people will benefit from educating themselves about claiming Social Security.
“Targeted rather than encyclopedic knowledge is what reduces the daily financial stress that consumes so many people’s time.”
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