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For a variety of reasons, career military families are, on the whole, less financially literate than the general population. That’s according to an annual survey of financial readiness conducted by First Command Financial Services. In the latest findings, the gap appears to be widening. Federal Drive with Tom Temin talked with First Command president and CEO, Mark Steffe for insight on the matter.

Interview transcript:

Mark Steffe: We do a financial behaviors index every month. And we’ve been doing that for 13 years. And it really gives us great insights into the financial feelings and behaviors of our career military families. And when we say career military families, we’re looking at what we would call middle class military families, commissioned officers and senior NCO and pay grades E-5 five and above, with incomes of at least $50,000. So we’ve been doing the financial behaviors index survey every month for 13 years. And then once a year in February, we add on nine additional questions which we call our annual financial readiness and test survey. And it tests people on things like, simple things or straightforward things that you’re going to deal with frequently throughout the course of a typical year. Which investments protect your purchasing power, how you access your credit history, how to put money aside for emergencies, finance charges on credit cards, and just really trying to understand people’s level of knowledge around these, what I would call basic financial issues, financial needs. And what we found this year in the survey was more alarming that what we’ve seen in past years. First of all, every year of this financial readiness survey, military members and their families have trailed their civilian counterparts. This year, we saw an even more alarming trend in the fact that the military score, the average grade this year was 57. And that’s down from 71, just a year ago. And that, as you can tell is a 14% drop in just one year. When you look at the general population, they stayed pretty well consistent at 69. So we’re seeing this alarming trend, I would say in the military dropping from 71 to 57, in just 12 months. What compounds that problem, Tom, is that military members are far more likely to say that they’ve been through some kind of financial readiness training. 56% of the military say they’ve been through financial readiness training, some kind of education on finance, where only 31% of the civilian population say they’ve gone through the same thing. And in this survey, less than 1% of the military scored a perfect score, yet 23% of the general population had a perfect score. So we’ve always seen the military trail, we’re seeing this downward trend, we’re seeing their scores decrease. And so we know that we need to do more to help our military families [sure] get this financial readiness training that they need.

Tom Temin: What is likely to happen to a family if they don’t have the financial readiness they need?

Mark Steffe: I think so many of the issues we face in families are rooted in financial issues. I know through other organizations that support the military, they’re digging into a lot of these things. You see divorce, whether you’re a civilian or in the military, a lot of that is driven by finances. You know, housing is driven by finances, food insecurity driven by financial issues, education for your children driven by financial issues. And then compounding that fact as all our military members know, you know security clearances are affected by financial issues. Not only do our military members carry the same burdens that the general civilian population carries, there’s also a larger impact of finances on their careers as well. And it just compounds the need for us to, again, do all we can to support military families to come up the learning curve on financial readiness.

Tom Temin: And is there any particular area that is most consistently a shortfall in their financial readiness or financial knowledge?

Mark Steffe: It’s pretty well across the board, Tom. You know, people don’t understand, interest charges are a big thing. You hear a lot of people saying, well, I’m making my minimum payments on my credit card, and I don’t know why the balance isn’t coming down. And if you understand credit cards and interest charges, that’s never gonna happen. You need to make more than that minimum payment to get those debts to come down. They don’t understand the size of the interest payments every month or every year and the percentage of being charged. You see it when they’re trying to purchase a home or purchase an automobile. Again, getting into those finance charges. Budgeting is particularly tough, as you can imagine, especially for a young military member or a young military family. Clearly folks in the military didn’t get into the military to get rich, but we believe they shouldn’t have to be poor either. A lot of the work that we do with military families is on the budgeting side, they just don’t understand where the money is going or how it’s being spent and where they can pick up savings instead of spending money on things that are nice to have, focus more on the things that you have to have. They don’t understand how they might be wasting money on these, as we talked about a minute ago, the high interest charges or the late fees and penalties that come with that because they’re not making their payments on time. So those are a couple of the big areas we see Some of the biggest concern.

Tom Temin: Sounds like everyone needs a Dave Ramsey moment here, I guess to get around the debts that they incur. I guess debt itself, having it can be a debilitating feeling for families, and that can lead to some of the stresses that you mentioned.

Mark Steffe: Debt, in and of itself, right, is not a bad thing, right? I mean, if you’re going to buy a home, you’re probably going to take on some debt, because you don’t have enough cash to pay cash for the house, you’re going to take on some debt to buy a car or using credit card, debt in and of itself isn’t a bad thing. But you have to understand how much debt Am I taking on? Can I truly afford that debt? How much interest am I being charged on that debt? What’s it going to cost me every month? And especially these days, if you have a good credit score, with low interest rates, this is not a bad time to have a little bit of debt, maybe, right? But it depends on your personal, particular financial situation. But we like to think that debt in and of itself isn’t a bad thing. But you have to fully understand, as I said before, how much debt? Can you afford it? And understand the rate of interest you’re being charged. And is there a lower rate out there available to you and make sure you’re keeping those interest rates as low as possible and making your payments on time.

Tom Temin: Something else that came up in the survey having to do with dependency on spouses to take care of financial matters, and very often the spouse is no better off than the primary military member at this financial game.

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Mark Steffe: We’re definitely collectively not doing enough to support the military spouses. We’re not giving military families overall the right support or enough support. And we all know the outsized role that military spouses play in the military family. They take the lead in managing household budgets and savings. Our surveys show that about, in most households, 95% of the spouses are making most of the financial decisions. They face unique challenges in finding and maintaining meaningful employment because of the frequent moves. They carry the burden of knowing that they will be a single parent if a tragedy strikes the military member on deployment or through combat, and they play a critical role in navigating the financial complexities of the family’s transition to civilian life as well. So, our military spouses play this huge role in the military family’s finances. And so whatever we’re doing to try to educate and coach a military member on financial readiness, we should be doing the exact same thing for our military spouses.

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