It’s wonderful to see so much press dedicated to the issue of financial illiteracy and its solutions. Undoubtedly, many financial literacy programs and efforts are having a positive impact.

For a number of years, financial literacy programs have focused, in large part, on improving the financial knowledge of participants, the presumption being that knowledge leads to behavior, which leads to results.

Intuitively we know that knowledge without action is fruitless, and action without knowledge is dangerous. But the premise that knowledge is causal in the behavior chain is suspect. If knowledge were causal for behaviors, we could solve all socially undesirable behaviors through education alone.

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Our addiction problems indicate that knowledge isn’t solely causal. Many addicted people are aware their behaviors are harmful, yet they continue. Knowledge without action is fruitless.

The adage of a fool and his money shows the other side of the coin: Action without knowledge leads to financial loss.

Social change has fed the need for greater financial literacy. The increasingly complex financial world is tough to navigate successfully. Coupled with the shift of responsibility onto individuals, particularly for retirement funding, and increasing life expectancies, the need for financial skills is greater than ever before.

Knowledge vs. Skill

Financial literacy efforts aren’t simply designed to increase knowledge without improving skills. Many institutions and providers of financial literacy efforts specifically include altering behavior and improving skills as a desired outcome. But there are two stubborn problems.

First, there’s an efficacy problem. When administering an education program, knowledge at the time of completion is easily measurable. But a lifetime of improved financial behavior isn’t. The tendency is to measure improvements in knowledge. Measuring knowledge has a tendency to shift the focus to knowledge, eroding effectiveness.

Second, there’s a bias problem. Institutional financial literacy sources often see financial literacy through their institutional lens. Banking sees the need for improved banking knowledge; insurance organizations focus on risk management.

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Expanding Definitions

There have been a few notable attempts to expand the financial literacy definition to include behavior. Some academics and institutions prefer “financial capability” as a term that’s more inclusive of the behavioral aspect — how people actually manage their money — as opposed to strictly having financial knowledge.

There’s nothing wrong with that. But nomenclature isn’t financial education’s largest problem.

The Assumptions Behind Bias

The fact that institutions are focusing on solutions in their realm of problems is indicative of a larger-scale bias we’re collectively guilty of.

We assume that consumers desire to be more financially literate. We believe that we can tweak our offerings and present programs that people will flock to in droves. The obstacle is that they’re simply not yet aware of this phenomenal opportunity. We’re sure this is what they want and need.

To a degree, we’re right. Financial literacy is what some want and need. But after so many years, we should question this assumption.

We can point to awareness. Much improved. We can point to programs. Unbelievable growth. We can point to legislation. Some progress, but slow.

But if we’re looking at financial behavior by the masses, we’ve got to be at least a little disappointed. We’re providing the opportunity. We’re shouting about it. We’re making it more and more visible and more and more available. Some consumers are responding. Most aren’t.

The assumption that people will flock to take advantage of the plethora of programs that can and will dramatically improve their lives more than they could possibly imagine is a flawed assumption.

Lessons From Behavioral Finance

Behavioral finance has shown us that investors don’t always make rational decisions. It has shown us that investors work from their own lens of bias. It has shown us that investors have problems with discipline and self-control.

Perhaps we should say ditto for consumers. After all, if consumers made rational decisions in their best interest, exercising discipline and self-control without bias, then the Ford F-150 wouldn’t be America’s best-selling vehicle. It’s simply not the most practical or rational vehicle for the average consumer.

We think consumers are longing for financial education, but they’re not. Apparently that longing was for an F-150. We were wrong.

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The Crossroads

There’s not just one path forward. We’re making an impact. We may not see it at the level we want. We’d love to see dramatic improvement for the masses. But we do see dramatic improvement for countless individuals.

We need to be cognizant of changing behaviors. Knowledge without action is fruitless.

We’ve got a lot of great things happening. Things that are expanding both our reach and our results. We see this in the myriad of different approaches: gamifying finance, storytelling, and more. Many of these approaches engage consumers that weren’t being reached and creating results that go past mere knowledge. Impactful stuff.

Many people enjoy driving cars, or even simply avail themselves of the usefulness of automobiles, without an engineering knowledge of automobile design. They would prefer to be operators, not engineers. We need to take that lesson to heart when it comes to finance. And technology can help.

Technology can help us to help people financially. We can use technology to educate, to inform, and to assist in implementing and managing solutions.

Currently, you need some level of knowledge to operate an automobile. Perhaps not for long, but for now you do.

How to Increase the Impact of Financial Literacy

Currently, you need a whole lot of knowledge to do well financially. But that’s changing. We really need to be sure we’re not losing the people we can help the most by trying to make financial engineers out of them. Instead, we need to help them be prudent and effective and safe as financial operators. We need them to be able to navigate their financial lives without causing harm to themselves or others.

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New technologies will dramatically improve what we can do as financial literacy advocates and practitioners. But only if we embrace the technologies. I love it when someone embraces learning how to make good financial decisions and understands the complex intricacies of their financial world. But I am all for helping those who aspire to be financial operators. They’ll still need a base level of knowledge. But if we try to make everyone a financial engineer, we’ll leave the majority of people behind. That’s no longer our only option.