Military Personnel Need Robust Financial Education More than Ever
The MOC
By
Nicholas Weising
June 28, 2024
The story of an E-1 blowing his first paycheck on a Mustang or Camero with an obscene interest rate is so ubiquitous that it is an inside joke among service members. It reveals a larger truth, however: many service members are not good at managing their finances. This is a problem not just for service members and their families, but for the government at large, as it has downstream impacts on social welfare and national security. The Department of Defense (DOD) should instate a comprehensive, mandatory financial education program for new recruits to bring all service members to a basic standard of financial literacy.
Military recruits often enter the service with a poor foundation of financial literacy. Americans find themselves investing at younger ages than previous generations. The rise of zero-commission brokers on phone apps has contributed to this phenomenon, and the newfound accessibility of the stock market has empowered many people to meet their financial goals. However, this democratization of finance is accompanied by new dangers for the public. Gen Z—the current cohort joining the military—is enthusiastic about investing but largely ignorant about its complexities. This is not entirely their fault: the American public education curriculum does not prioritize personal finance and investing. A 2018 study found that many high school students in the United States lack even basic financial knowledge and skills. In this vacuum, social media finance influencers (called ‘finfluencers’) attract massive audiences of young adults seeking advice. While some finfluencers provide decent information, many are not financial professionals and others outright scam their audiences. New recruits enter the military from this baseline.
Downstream Impacts
The DOD’s existing financial education program fails to secure service members’ financial futures. The Office of Financial Readiness is tasked with providing financial education materials for all service members, including no-cost sessions with a financial advisor. This is an invaluable tool, but because many of these services are elective and under-advertised, they are underused. Implementation varies from service to service. The Navy offers financial literacy training via the Navy e-Learning (NeL) website and app whereas the Army has a thorough Financial Readiness Program (FRP) with classroom modules and partnerships with non-profit organizations.
These different iterations of what is the same material—meant to offer flexibility to the services—have produced poor educational outcomes. The National Foundation for Credit Counseling reported that 34 percent of active duty members are unable to pay their bills on time and that 11 percent have debts in collection. The general public’s reported amounts for the same two categories are 25 percent and 5 percent respectively. Financial difficulties can be directly linked to stress-related illnesses and substance abuse. They are a common cause of poor job performance. Good personal financial management on the part of individual service members can increase morale, stability, and unit effectiveness.
Poor financial management among service members is a strain on government resources and opens the door to national security liabilities. Service members exiting the military with poor financial management skills can find themselves beneficiaries of social assistance. 1.2 million veterans are on the Supplemental Nutritional Assistance Program (SNAP) because they suffer from food insecurity. Additionally, the Department of Housing and Urban Development (HUD) has allocated 112,000 housing vouchers specifically for veterans who need governmental assistance in finding residences. This does not mean these veterans are unworthy of receiving such welfare, but the government can nip the problem in the bud by engendering good financial habits while they are in the service. Doing so would save the government money in the long run.
The DOD has a stake in teaching financial literacy because struggling service members make for susceptible targets. Excessive personal debts are a known vector for foreign agents to recruit Americans as intelligence assets. For instance, John Anthony Walker was a chief warrant officer in the Navy who famously spied for the Soviet Union for money which he needed to cover debt incurred from a failed business prospect. DOD has learned the hard way about the risk of irresponsible budgeters in sensitive positions: security clearances are routinely revoked due to the perceived recklessness of their debt. By ensuring service members operate in financially responsible ways, the DOD can head off this threat.
A New Military Financial Education
An expanded DOD financial literacy program needs to cover two main topics in detail: budgeting and saving for retirement. Members of the military should be thoroughly taught how to budget in a mandatory classroom setting by trained financial instructors. Currently, the financial education module in basic training is just one of many PowerPoint presentations. This means that the information in that module blurs together with other lessons and does not stick with recruits. The current delivery is ineffective: 29 percent of junior enlisted personnel face food insecurity and are victim to predatory lenders. The solution is having financial education being a continuous, mandatory, and in-person process of military onboarding and daily life. Financial education modules taught by a cadre of trained educators should be implemented in Military Entrance Processing Stations, Boot Camp/Officer Candidate School, and technical training. Senior noncommissioned officers should then follow up with new service members in their charge after training to ensure they are following through with what they learned in modules. With a budget in order, enlisted personnel can devote income to retirement. American service members deserve to enjoy their golden years without worrying how they will afford to subsist.
The Thrift Savings Plan (TSP) is one of the best retirement plans in the job market, but service members by-and-large do not effectively leverage its powerful tools to save and invest for their retirement. Most do not log in after their first-in processing and many do not know their log-in information. Education on TSP is critical because it ensures those service members who do not serve 20 years to qualify for a full pension still leave the military in a strong financial position. Only 19 percent of active-duty troops and 14 percent of Guardsmen/reservists served the full 20 years to qualify for a full pension. Depending on where a service member trained, the quality of financial education can vary wildly. If service members are not taking advantage of TSP for the match to employee retirement contributions and do not use a personal brokerage account, they are likely not investing at all, which will set them up for financial failure.
The Office of Financial Readiness needs to standardize financial education across the services and make learning modules mandatory and continuous over a service member’s career. Doing so will drastically improve troops’ quality of life. Increased financial education funding is best viewed as an investment by the federal government. Reforming the Office of Financial Readiness’s classes could potentially save the government billions of dollars of SNAP and other federal benefits. Such classes should be taught by qualified financial educators with check-ins from their chain of command. Doing this might be one of the most impactful things those leaders will do to affect the quality of life of those around them.
Nicholas Weising, Program Associate
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.
Center for Maritime Strategy
By Nicholas Weising
The story of an E-1 blowing his first paycheck on a Mustang or Camero with an obscene interest rate is so ubiquitous that it is an inside joke among service members. It reveals a larger truth, however: many service members are not good at managing their finances. This is a problem not just for service members and their families, but for the government at large, as it has downstream impacts on social welfare and national security. The Department of Defense (DOD) should instate a comprehensive, mandatory financial education program for new recruits to bring all service members to a basic standard of financial literacy.
Military recruits often enter the service with a poor foundation of financial literacy. Americans find themselves investing at younger ages than previous generations. The rise of zero-commission brokers on phone apps has contributed to this phenomenon, and the newfound accessibility of the stock market has empowered many people to meet their financial goals. However, this democratization of finance is accompanied by new dangers for the public. Gen Z—the current cohort joining the military—is enthusiastic about investing but largely ignorant about its complexities. This is not entirely their fault: the American public education curriculum does not prioritize personal finance and investing. A 2018 study found that many high school students in the United States lack even basic financial knowledge and skills. In this vacuum, social media finance influencers (called ‘finfluencers’) attract massive audiences of young adults seeking advice. While some finfluencers provide decent information, many are not financial professionals and others outright scam their audiences. New recruits enter the military from this baseline.
Downstream Impacts
The DOD’s existing financial education program fails to secure service members’ financial futures. The Office of Financial Readiness is tasked with providing financial education materials for all service members, including no-cost sessions with a financial advisor. This is an invaluable tool, but because many of these services are elective and under-advertised, they are underused. Implementation varies from service to service. The Navy offers financial literacy training via the Navy e-Learning (NeL) website and app whereas the Army has a thorough Financial Readiness Program (FRP) with classroom modules and partnerships with non-profit organizations.
These different iterations of what is the same material—meant to offer flexibility to the services—have produced poor educational outcomes. The National Foundation for Credit Counseling reported that 34 percent of active duty members are unable to pay their bills on time and that 11 percent have debts in collection. The general public’s reported amounts for the same two categories are 25 percent and 5 percent respectively. Financial difficulties can be directly linked to stress-related illnesses and substance abuse. They are a common cause of poor job performance. Good personal financial management on the part of individual service members can increase morale, stability, and unit effectiveness.
Poor financial management among service members is a strain on government resources and opens the door to national security liabilities. Service members exiting the military with poor financial management skills can find themselves beneficiaries of social assistance. 1.2 million veterans are on the Supplemental Nutritional Assistance Program (SNAP) because they suffer from food insecurity. Additionally, the Department of Housing and Urban Development (HUD) has allocated 112,000 housing vouchers specifically for veterans who need governmental assistance in finding residences. This does not mean these veterans are unworthy of receiving such welfare, but the government can nip the problem in the bud by engendering good financial habits while they are in the service. Doing so would save the government money in the long run.
The DOD has a stake in teaching financial literacy because struggling service members make for susceptible targets. Excessive personal debts are a known vector for foreign agents to recruit Americans as intelligence assets. For instance, John Anthony Walker was a chief warrant officer in the Navy who famously spied for the Soviet Union for money which he needed to cover debt incurred from a failed business prospect. DOD has learned the hard way about the risk of irresponsible budgeters in sensitive positions: security clearances are routinely revoked due to the perceived recklessness of their debt. By ensuring service members operate in financially responsible ways, the DOD can head off this threat.
A New Military Financial Education
An expanded DOD financial literacy program needs to cover two main topics in detail: budgeting and saving for retirement. Members of the military should be thoroughly taught how to budget in a mandatory classroom setting by trained financial instructors. Currently, the financial education module in basic training is just one of many PowerPoint presentations. This means that the information in that module blurs together with other lessons and does not stick with recruits. The current delivery is ineffective: 29 percent of junior enlisted personnel face food insecurity and are victim to predatory lenders. The solution is having financial education being a continuous, mandatory, and in-person process of military onboarding and daily life. Financial education modules taught by a cadre of trained educators should be implemented in Military Entrance Processing Stations, Boot Camp/Officer Candidate School, and technical training. Senior noncommissioned officers should then follow up with new service members in their charge after training to ensure they are following through with what they learned in modules. With a budget in order, enlisted personnel can devote income to retirement. American service members deserve to enjoy their golden years without worrying how they will afford to subsist.
The Thrift Savings Plan (TSP) is one of the best retirement plans in the job market, but service members by-and-large do not effectively leverage its powerful tools to save and invest for their retirement. Most do not log in after their first-in processing and many do not know their log-in information. Education on TSP is critical because it ensures those service members who do not serve 20 years to qualify for a full pension still leave the military in a strong financial position. Only 19 percent of active-duty troops and 14 percent of Guardsmen/reservists served the full 20 years to qualify for a full pension. Depending on where a service member trained, the quality of financial education can vary wildly. If service members are not taking advantage of TSP for the match to employee retirement contributions and do not use a personal brokerage account, they are likely not investing at all, which will set them up for financial failure.
The Office of Financial Readiness needs to standardize financial education across the services and make learning modules mandatory and continuous over a service member’s career. Doing so will drastically improve troops’ quality of life. Increased financial education funding is best viewed as an investment by the federal government. Reforming the Office of Financial Readiness’s classes could potentially save the government billions of dollars of SNAP and other federal benefits. Such classes should be taught by qualified financial educators with check-ins from their chain of command. Doing this might be one of the most impactful things those leaders will do to affect the quality of life of those around them.
Nicholas Weising, Program Associate
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.