By Mark Steffe
Money matters weigh heavily on the minds of many military families. While the issue has roots in several areas—frequent relocations, salaries that struggle to keep pace with inflation and high military spouse unemployment—it’s compounded by financial knowledge that often lags behind the general population.
The 2024 First Command Financial Behaviors Index findings continue to show a long-term trend that indicates military families are struggling with personal finance knowledge. On the nine-question test designed to measure financial understanding associated with financial readiness, 20% of military test takers correctly answered at least seven questions. This compares to 41% of civilians. Military test takers scored lower than the general population in 11 of the past 13 years.
Unfortunately for military families, the impacts of poor financial readiness are further reaching than the numbers reflected in a service member’s bank account.
Financial Readiness
On a large scale, poor financial readiness could impact the future success of the U.S. military. A new survey by Blue Star Families and Syracuse University found that only 32% of U.S. military families would recommend pursuing military service, a significant drop from 55% in 2016. The survey of over 7,400 responses cited quality-of-life issues like poor spousal job opportunities, housing concerns, inadequate health care and the impact of inflation and low military pay as major factors deterring families from recommending military service.
When military families have poor financial readiness, a variety of aspects of their lives can be negatively affected—including a service member’s career. For instance, a service member’s security clearance application can be denied if their debt-to-income ratio is too high. Financial issues can limit a person’s military career trajectory and sometimes result in disciplinary action under the Uniform Code of Military Justice (UCMJ).
Financial stress can also lead to significant strain within family relationships, including stress among children and marital relationships. Recent findings from National Debt Relief report that 3 in 5 Americans have considered putting off marriage to avoid inheriting their partner’s debt. Additionally, 54% of respondents believe that having a partner who is in debt is a major reason to consider divorce.
Improving financial readiness through public and private partnerships and government action like the SMART Save Act are steps in the right direction. However, financial training isn’t the full solution. Our nation’s military families deserve better access to financial training, but they shouldn’t be expected to be finance experts. For help establishing a financial plan and setting long- and short-term financial goals, there’s no substitute for the knowledge and personalized coaching of a financial advisor.
Financial Security
The benefits of financial readiness are clear. What’s not as clear, for some, is how to pursue financial stability. It starts with a financial plan. As Benjamin Franklin is credited with saying, “If you fail to plan, you are planning to fail.” This is true for many things, including personal finance.
While it’s important to have a financial plan, they’re meant to be dynamic, factoring in planned and unplanned life events. Your plan should constantly evolve to meet changing needs, preferences and situations throughout your life.
If establishing a financial plan on your own feels complicated, working with a financial advisor can help to alleviate some of the stress that comes with making sure you’re financially squared away. You should expect to be an active participant in planning. Your advisor should offer a transparent and interactive process that focuses on your goals and priorities, while addressing your unique needs and connecting with you on your terms.
Financial Advisors
First Command’s research results support the value of working with a financial coach. It shows 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 (Q4 2023) shows military respondents with an advisor are saving an average of $2,275 per month. That compares to $1,206 for military respondents without an advisor. Averages reported by the general population are $1,175 for those with an advisor and $1,056 for do-it-yourselfers.
- Higher net worth. The Index shows long-term savings and retirement holdings of $290,907 for military families with an advisor versus $149,981 for those who go it alone. For the general population, the totals are $269,071 and $131,953.
- Greater financial confidence. The Index reveals that 81% of military respondents with an advisor are confident their financial situation will improve in the next year. That compares to 37% of military respondents without an advisor. For the general population, it’s 48% for those who work with an advisor versus 25% who are do-it-yourselfers.
Dedicated Coach
People use financial advisors for many of the same reasons they use personal trainers, life and career coaches. Firstly, many enjoy the support and guidance of a qualified financial coach helping them clarify their financial goals and needs. For example, many clients have several aspects of their finances they’d like to improve including, more retirement savings, paying down debt and saving for kids’ college. Financial advisors can help their clients prioritize their financial goals as part of a collaborative, personal relationship.
Military-Specific Strategies
A good financial advisor will offer tailored solutions to your unique financial needs. For military families, finding an advisor who knows the military lifestyle can be more effective. Specifically, finding someone who understands military pay and benefits like housing allowances, special duty pay, retirement benefits, health coverage and the Thrift Savings Plan (TSP), is key.
While all financial advisors strive to provide sound guidance, those without specialized knowledge of military pay and benefits may inadvertently provide advice that doesn’t account for the nuances of military compensation. For example, they might treat certain allowances as permanent income rather than temporary. Or they may not fully understand the details around reimbursements for Personally Procured Moves (formerly known as a DITY or do-it-yourself move) or the provisions of benefits like Servicemembers’ Group Life Insurance and the Survivor Benefit Plan. Working with an advisor credentialed in military financial counseling can help ensure advice is tailored to the unique aspects of military finances.
Military families make immense sacrifices for the safety and security of our country. With greater access to knowledge and support of financial advisors, military families can start to pursue the financial security they deserve.
Read more articles for the veteran community here.
