First Command Reports: Military Families Struggling with Money Knowledge

FORT WORTH – Many career military families continue to struggle with basic money knowledge, but a key subset of them are overcoming the challenge by partnering with financial professionals, according to the First Command Financial Behaviors Index®.

Results of the 13th annual financial readiness test and survey commissioned by First Command Financial Services, Inc. reveal that middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) trail their civilian counterparts on the nine-question quiz, which is designed to measure financial understanding associated with financial readiness.

Average test scores were 59 for military test takers versus 69 for the general population. Other key findings show:

• Passing grades are rare. Four out of five military families did not earn a passing grade (80% of military families versus 59% of the general population).
• Perfect scores are even rarer. Test results show just 2% of military families correctly answered all nine questions. That compares to 6% of the general population

These results represent a long-term trend. Military test takers scored less than the general population in 11 of the past 13 years.

“Military service members and their families are particularly susceptible to the pitfalls of a lack of financial knowledge,” said First Command President/CEO Mark Steffe. “They face unique financial challenges related to permanent changes of station, military spouse underemployment and other elements of military life. Financial readiness issues cut to the heart of many important life decisions, including education, divorce, safety and mental health.”

Financial training and education doesn’t make a notable impact on the scores, either. Among those who have completed a financial training or education program, the Index reveals 86% did not earn a passing grade. That fail rate is six points higher than the overall military results. And how many earned a perfect score? Zero percent.

“Test results reveal that financial training and education alone is not the solution,” Steffe said. “Our nation’s military families need professional support. We encourage military leaders to advocate for the outsourcing of financial coaching resources for military families.”

This recommendation is supported by First Command’s research results. Career military families who work with a financial coach outperform the general population in several key measures of financial readiness, including:

• Higher savings rates. The latest quarterly Index results shows military respondents with an advisor are putting away an average of $3,316 per month for savings and retirement. That’s well above the averages reported by the general population, which is $1,369 for those with an advisor and $1,004 for do-it-yourselfers.
• Greater financial confidence. The Index reveals that 79% of military respondents are confident their financial situation will improve in the next year. That compares to 49% of those in the general population who work with an advisor and 24% who are do-it-yourselfers. And 77% of military respondents are confident in their ability to retire comfortably. In the general population, that compares to 49% who work with an advisor and 18% who go it alone.

“While financial education can play an important role in improving money mastery, financial coaching is clearly associated with positive behaviors and confidence,” Steffe said. “Military families who work with a financial advisor save more and feel better about their financial futures than those who go it alone. We believe professional coaching is where the financial services industry can do the most good for our nation’s military families.”

Coaching is also favored by members of the First Command Military Advisory Board. This select group of retired senior flag officers and senior enlisted leaders represent each branch of the nation’s military services. They advise company leadership on how to best serve the interests of career military families. Board member Ramón Colón-López, a retired Senior Enlisted Advisor to the Chairman of the Joint Chiefs of Staff and 33-year veteran of the Air Force, said that "supporting military families in navigating the intricate terrain of financial stability isn't just a duty, it's a moral imperative. From deployments to PCS moves, they brave a myriad of challenges. Through financial coaching and other accessible resources, we empower them to pursue their financial future amidst the uncertainties of service life. This is a problematic gap in our current system that industry can help the department better serve our members and their families."

Financial coaches recommend consistency in simple habits like automatically depositing a portion of each paycheck into savings or an investment account or sticking to a budget. While this can be easier said than done, 2024 is an ideal time for military families to increase savings. Service members received a 5.2% pay raise in January. The Index reveals that 59% of career military families expect to increase the amount they put into savings and Thrift Savings Plan (TSP) accounts. Fifteen percent say they plan to put at least 10% of their raise into TSP.

“This savings commitment aligns well with the coaching provided by our advisors, who have long promoted the merits of allocating half of every pay raise to upgrading current lifestyle and the other half to building a financial foundation for the future,” Steffe said. “Investing in the Thrift Savings Plan is a particularly smart move. Our clients are ardent users of the TSP. We recognize that TSP is a powerful retirement savings tool at a low cost. Notably, TSP participation rates for First Command clients are higher than for the overall active duty military market. And we recommend the TSP, even though we earn no fees or commissions from it.”

First Command’s support of the TSP extends beyond the company into the broader financial services industry. The Index reveals that TSP participation rates are 61% for those with an advisor versus 39% for do-it-yourselfers.

“Financial advisors are an important source of financial information, but coaching the right behaviors is where they bring the greatest value,” Steffe said. “Financial coaches help service members make the most of their military pay and benefits. They keep them focused on developing and sticking with good behaviors that address all of their family’s financial needs. Coaching helps military families bridge the gap in their own financial knowledge so they feel more confident in their pursuit of long-term financial security.”

TSP funds have very low administrative and investment expenses, and low expenses can have a positive effect on the rate of return of your investment.

About First Command

First Command Financial Services and its subsidiaries, including First Command Brokerage Services and First Command Bank, coach our Nation’s military families in their pursuit of financial security. Since 1958, First Command Financial Advisors have been shaping positive financial behaviors through face-to-face coaching with hundreds of thousands of client families.