Last week, we discussed Gallup's finding that affordability — for the fifth year in a row — remains Americans' top financial concern and that a growing number of households feel their financial situation is deteriorating.

Inflation and rising costs are certainly part of the story, but they may not be the entire reason. A new study from TIAA Institute suggests another factor is contributing to that growing anxiety: Americans are becoming less financially literate.

The results showed that, out of 28 questions, only 47% were answered correctly — the lowest level ever recorded since the survey began more than a decade ago. Even more notable, one-quarter of adults now fall into the category of very low financial literacy.

As financial decisions grow more complex and information becomes more abundant, many households may be finding it harder to evaluate risks and distinguish good advice from bad.

One of the study's most revealing findings showed that understanding risk remains the weakest area across all generations. Only 36% of risk-related questions were answered correctly, and performance improves surprisingly little with age.

Gen Z recorded the lowest financial literacy scores of any generation, while Baby Boomers scored the highest. Younger adults are entering financial markets during a period when information is abundant, advice is everywhere, and major life milestones — from homeownership to retirement planning — often feel further out of reach than they did for previous generations.

For advisors, one takeaway is to stop assuming clients understand the fundamentals. Concepts like risk, Medicare, withdrawal strategies, and market volatility may seem basic within the profession, but the data suggests many clients are operating with significant knowledge gaps.

Taking a few extra minutes to confirm understanding today may prevent costly mistakes and unnecessary anxiety. The ability to simplify complex topics is just as important as helping clients select the right investments.

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