{"id":314,"date":"2022-10-03T12:00:00","date_gmt":"2022-10-03T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/more-money-retirement-financial-literacy\/"},"modified":"2025-09-05T16:43:20","modified_gmt":"2025-09-05T16:43:20","slug":"more-money-retirement-financial-literacy","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/more-money-retirement-financial-literacy\/","title":{"rendered":"Want 3x as Much Money in Retirement? Here\u2019s the Key"},"content":{"rendered":"
\n

I live with an interesting cognitive dissonance as a personal finance content creator: On one hand, I\u2019ve always believed knowledge is power. I don\u2019t buy that people are \u201cbad with money\u201d and actively choose to behave in a way that\u2019s disadvantageous to them, and generally speaking, I believe when people know better, they do better. Clearly, on some level I believe more education makes a difference<\/strong>\u2014otherwise, why would I write this blog or produce The Money with Katie Show<\/em>?<\/p>\n<\/div>\n

\n
>
\n \u201c<\/span>Financial literacy has a direct impact on financial outcomes.\u201d<\/span>\n <\/p><\/blockquote>\n<\/figure>\n
\n

On the other hand, I can read graphs like these<\/span><\/a>, documenting the rampant wealth inequality in our country that\u2019s been steadily worsening since 1975. Today, the top 10%<\/span><\/a> of earners take home 50% of the total income, leaving the remaining 90% to share the other 50%. It feels like an uphill battle. <\/p>\n

Surely information alone is not enough to close this gap, right?<\/em> I\u2019d think to myself in varying degrees of despair: Does what I do even matter?<\/em><\/p>\n

Maybe that\u2019s why\u2014when I stumbled upon the two academic papers we\u2019ll be exploring today\u2014my self-preserving confirmation bias sprang into action: Yes, it <\/em>must<\/em><\/strong> matter<\/em>!<\/p>\n

To be sure, it\u2019s certainly not enough to close the gap or solve the problem on its own. But we do<\/em> have empirical data (from the National Bureau of Economic Research<\/span><\/a> and the University of Pennsylvania<\/span><\/a>) that prove financial literacy has a direct impact on financial outcomes.<\/strong><\/p>\n

Optimism! <\/p>\n<\/div>\n

\n
\n

My own experience with financial literacy<\/h2>\n

This is where I\u2019ll regale you with my metaphoric before-and-after pictures, \u00e0 la Jenny Craig infomercial. <\/p>\n

But honestly, it\u2019s not that deep. Financial literacy just played a pretty substantial role in my money (and life) glow-up. (Because it turns out having more money does,<\/em> in fact, improve your life<\/span><\/a>. \u201cMoney can\u2019t buy happiness\u201d merely means there are diminishing returns on happiness from accumulating excess wealth, not<\/em> that having more money doesn\u2019t make your life objectively easier.)<\/p>\n

For the first year I worked, I had no plan. I didn\u2019t understand investing. I saved haphazardly. I couldn\u2019t have explained the logic behind a Roth IRA even if you had threatened to submerge me in hot queso (which I happened to eat a lot at the time, since I was going out to lunch every day<\/em>). <\/p>\n

After working for a year and earning a salary around $52,000, I had about $12,000 in savings\u2014meaning I spent the other $33,240 of after-tax income on\u2026well, I\u2019m not sure, since my rent was only $800\/month and I didn\u2019t have a car payment. <\/p>\n<\/div>\n

\n
>
\n \u201c<\/span>Without a doubt, learning the basics had a profound impact on my financial picture.\u00a0My income hadn\u2019t changed, but my approach did.\u201d<\/span>\n <\/p><\/blockquote>\n<\/figure>\n
\n

But once I started learning about how to manage money (how to save it, how to invest it, how to track where it was going<\/em>), I quickly amassed a net worth of around $100,000 in a little over two years. Without a doubt, learning the basics had a profound impact on my financial picture. <\/p>\n

My income<\/em> hadn\u2019t changed, but my approach<\/em> did\u2014and as a result, I was able to plug all the holes in my monthly balance sheet and institute a more formulaic strategy that included:<\/p>\n