Financial Literacy Drops to 10-Year Low; Employer Support Needed
After data showing that employee financial confidence has fallen to its lowest level since 2012, a new survey offers more evidence that employees are in a precarious financial situation: Americans’ financial literacy has dropped to a 10-year low.
That’s according to a new study by investment giant TIAA and Stanford University’s Global Financial Literacy Excellence Center (GFLEC), which surveyed 3,602 adults on 28 questions around investing, retirement, debt, insurance, and other financial concepts.
“Financial literacy is an essential life skill, like reading and writing. A decade of data shows we are not where we need to be, and this year’s results make the urgency impossible to ignore,” said Annamaria Lusardi, an economist from Stanford University and academic director of GFLEC.
U.S. adults correctly answered only 47% of the financial literacy questions in 2026, the lowest score in the Index’s 10-year history and a big drop from last year. Members of Gen Z correctly answered just 38% of questions, far below every other generation.
The share of Americans with very low financial literacy has grown to 25% from 20% since 2017, pulling the national average down, according to the study.
“The people paying the price are everyday workers trying to prepare for retirement,” said Kourtney Gibson, CEO of Retirement Solutions at TIAA in Charlotte, N.C. Poor financial literacy “shows up in retirement accounts that fall short, in Social Security decisions made without the full picture, and in financial stress that compounds over time.”
The Importance of Financial Literacy
Being financially fluent is vital, Gibson said, because it is strongly associated with saving regularly, managing debt effectively, and feeling confident about retirement. Among workers with higher retirement fluency, she explained, more than 80% save for retirement on a regular basis, and 70% feel confident they will have enough money to live comfortably throughout retirement. That’s a “reminder that knowledge, when made accessible, makes a powerful difference.”
That is especially important in 2026, a time in which employees’ spending power is being hit by rising inflation, particularly high gas prices and high medical costs. Wages are largely stagnant. Just 53% of workers say they feel in control of their finances, according to MetLife’s recent annual Employee Benefits Study, down from 55% last year and 62% in 2022. Half of all employees report that they are living paycheck to paycheck, up four percentage points from last year and eight points since 2020. At the same time, the ability to keep a three-month savings cushion has dropped by five points since last year, according to the report, according to MetLife.
Meanwhile, retirement confidence is also waning, while economic pressures are prompting more employees to tap their retirement savings for short-term financial needs. Nearly 2 in 10 workers (19.2%) had an outstanding 401(k) loan at the end of the first quarter of 2026, up from 18.8% a year earlier, according to new data released by Fidelity Investments. About 2.4% of workers took out a new loan from their 401(k) in the first quarter, up from 2.3% in 2025.
Employer Role
The data is evidence that employers can, and should, focus on financial wellness strategies, which can include educational efforts that could improve employees’ financial literacy.
“Employers are uniquely positioned to be part of the solution,” Gibson said. “The employer-employee relationship represents one of the most direct and trusted opportunities to deliver meaningful financial and retirement education at the moments that matter most.”
Whether through smart retirement plan design that incorporates lifetime income options or financial wellness programs that offer personalized advice, access to the right knowledge and tools can change the trajectory of someone's retirement journey, she added. “We urge every employer to ask themselves not just whether they offer a retirement plan, but whether their employees truly understand their savings options and how to make their hard-earned money last.”
Craig Gabel, vice president, retirement plan consulting, at benefits and HR consulting firm OneDigital Financial Services in Medina, Ohio, agreed, adding that a variety of financial wellness benefits are key to improving financial literacy and financial well-being.
Organizations should find ways to reduce the barriers to access tools and resources by making the process simple and streamlined, he said. “Some of those resources may be educational webinars, access to financial advisors or coaches, technology that pulls these altogether, or implementing solutions around emergency savings and helping with student loan debt,” Gabel said.
Was this resource helpful?
Validate your HR expertise
Earning your SHRM-CP credential makes you a recognized expert and leader in the HR field.
Related Content
Learn how Marsh McLennan successfully boosts staff well-being with digital tools, improving productivity and work satisfaction for more than 20,000 employees.
The proliferation of artificial intelligence in the workplace, and the ensuing expected increase in productivity and efficiency, could help usher in the four-day workweek, some experts predict.
As artificial intelligence technology continues to develop, the demand for workers with the ability to work alongside and manage AI systems will increase. This means that workers who are not able to adapt and learn these new skills will be left behind in the job market.