Study: Servicemembers slightly better with money management

CHEYENNE, Wyo. — Military members have a better understanding of financial issues than the average civilian, but they still have problems related to credit card and mortgage debt.

Those are among the findings published earlier this month by the Financial Industry Regulatory Authority, an independent nonprofit financial regulation organization based in Washington, D.C.

Christine Kieffer, a senior director at the nonprofit, said one should be careful when comparing military financial habits to the public at large, given that the military tends to skew younger and more male than the general U.S. population.

But when looking specifically at the military compared to U.S. males ages 18 to 35, Kieffer said there are some clear differences between the two groups.

“With that in mind, we find the military service member is doing a pretty good job of making ends meet,” Kieffer said. “They’re spending less of their income and they’re saving more and not having difficulty in managing their expenses.”

When it comes to financial literacy, Kieffer said military personnel score higher on questionnaires about financial issues like how mortgages function and how bond prices are influenced by changes in interest rates.

On a five-question quiz, she said, 42 percent of military personnel were able to get four or more correct answers compared to just 30 percent of the comparable civilian population.

“There’s a pretty big differential there,” Kieffer said. “Military service members are doing a good job of having emergency savings, and they do a pretty good job about knowing about finances.”

W.G. “Bud” Schneeweis is associate director of the Financial Industry Regulatory Authority’s Military Financial Readiness Project. He credited that phenomenon to the military’s proactive efforts to educate troops about fiscal matters.

“The Department of Defense has invested quite a bit over the years in financial literacy for the military,” Schneeweis said. “Part of it is keeping folks’ credit clear for security clearances so folks can do their job.

“But you also don’t want them to be troubled by financial troubles at home; you want them to be able to focus on their job.”

Being able to focus is especially important to the men and women at F.E. Warren Air Force Base in Cheyenne, given the base’s responsibility of safeguarding part of the U.S. intercontinental ballistic missile fleet.

Sgt. Torri Ingalsbe, a spokeswoman for the base, said the Air Force provides a number of resources for new recruits and veteran airmen alike aimed at helping them keep their finances in order.

“When you’re a brand new airman, you receive a lot of different briefings, but some of those are about financial management and planning,” Ingalsbe said.

“They talk about different programs such as the Thrift Savings Plan so you can have it directly taken from your paycheck. It works as a mutual fund would work.”

Base personnel also take part in numerous brown bag lunch seminars that cover financial topics ranging from financial planning and budgeting to long-term saving and credit card debt management.

“Airmen can go at any time and sit down with a financial consultant or planner and go over any concerns that they have,” Ingalsbe said.

“They can help you set up a budget, retirement planning. It’s definitely something we’re educated on very early on in our career, and financial planning is always available to us.”

But the study found that military personnel do have some financial vulnerabilities compared to the civilian population.

One is credit card debt: 52 percent of military personnel carry balances on their credit cards month to month compared to 30 percent of the comparable civilian population.

Schneeweis said one contributor to that is the fact that many military personnel are still young, yet they are getting steady paychecks. That can encourage them to take out credit cards.

“It’s easy for them to get in over their heads when they first start accessing these products,” he said. “I don’t think you’ll find them much different than college students in that regard.”

The other major hurdle for military personnel is going underwater on home mortgages. Kieffer said 42 percent of those surveyed reported owing more on their homes than the homes were worth.

That compares to 27 percent of the comparable civilian population.

“The military and national population had very similar home ownership numbers,” she said. “So it’s similar in terms of home ownership rate but dissimilar in the level of debt burden they’re facing.”

Schneeweis says that disparity is a result of two factors.

The first was the collapse of the housing market leading to substantially lower home values in recent years. The second was the VA’s incentives that let military personnel buy homes with reduced down payment requirements. That, when combined with a housing downturn, can spell trouble.

“For veterans, home ownership is available with a very low or even zero down payment,” Schneeweis said. “But if you buy a home with a low down payment and the value of your home drops, it can be very easy to get underwater.”

For that reason, while the military does a good job educating its members on financial literacy, Schneeweis said home ownership is one area he would like to see the military place a greater focus in its educational efforts.

“They need to emphasize that it’s easy to get into trouble with housing,” he said. “But they also need to continue to emphasize debt and financial products, avoiding non-bank borrowing because that can get you into trouble quickly.

“I don’t think the original premise has changed. Financial readiness is a part of military readiness.”

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