The U.S. military offers incomparable benefits to those who
choose to serve — paid health insurance and housing, job security, and tuition
assistance to name a few — however, when it comes to financial planning,
service members are left largely in the dark. On May 15 the House of
Representatives passed a bill mandating financial literacy training to all
service members, a much-needed step toward preparing them for fiscal success.
The proposal is part of the National Defense Authorization Act for Fiscal
The initiative would provide $400 million over five years,
starting in 2016, for improved financial literacy training for troops and
closely mirrors recommendations from the Military Compensation and
Retirement Modernization Commission. The changes aimed at increasing the
strength and frequency of financial education are especially important because
service members will have to make some substantial financial decisions if
the commission’s recommendations related to significantly overhauling the
military’s retirement and health care systems go forward.
As noted in recent reporting, the new plan would require defense officials to
include questions related to the financial literacy and preparedness of troops
in the Defense Department’s annual status-of-forces survey. Service officials
would then use that information to evaluate and update the financial literacy
training — an important measure to ensure the training is effective.
Currently the military provides only general financial
advice, out of concern that unscrupulous financial advisors would steer young,
inexperienced service members into inappropriate investments. This is a fair
concern, but the reality is that both the need and the desire are present for
more training. A 2013 survey compiled by Blue Star Families’ Department of
Research and Policy found that only 12% of service members and their
families said they received financial education through military training.
However, 90% said they wanted more preventative financial education.
While this marks a promising proposal with real potential
for improving the financial knowledge and preparedness of service members, it’s
imperative to also note the direct impetus for this legislation: high
suicide rates tied to financial struggle (see page 5). The sad reality is
that many service members have felt so overwhelmed by their financial reality
that they see ending their lives as the only escape. This groundbreaking
proposal is geared to help reduce the rate of military suicide.
A Financial Planning investigation found that financial
stress as a top precipitating factor to military suicide that’s been
largely overlooked ever since the military suicide rate began to exceed
comparable civilian rates more than a decade ago. Though we certainly can’t
expect that this is the only answer to preventing suicide, it is an important
way to recognize the needs of our troops.
It’s worth a review of the Military Compensation and
Retirement Modernization Commission proposal (see page 46) for insight on
how the new legislation and accompanying resources could help service members
mitigate financial strain. It’s especially noteworthy in that it identifies an
additional benefit of the training as retention. DoD estimates that enhanced
financial literacy training would reduce the number of service members
involuntarily separated due to financial problems. Not only does this bode well
for retaining personnel, but it also is projects a savings of $13 million
to $137 million annually. Financial literacy is essential not just for the
individual service member, but also for the entire Defense Department.
An important aspect of the proposed program is the
recognition of the link between financial health and the overall readiness of
the military. Training and education at the earliest stages would go a long way
in helping to prepare service members for success and, most importantly,
prevent the kind of hardship that leads them to contemplate taking their own
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