Are you financially illiterate? Suze Orman says ‘probably 95%' of Americans are

Suze Orman

Doesn't want anyone to feel stupid. She says that her attitude is what has made her a success in the personal finance world, even though much of the advice is common among money experts.

Orman stated on a recent episode of "Who's talking to Chris Wallace?" that "They can relate because I speak Suze. I speak a language they can understand." Max. "I don't make them feel bad when they don’t understand something. When they see me they see hope. If Suze can start at 30 years old, I can too.

Orman, host of "

Women & Money: Everyone should listen (including women)

Podcast and co-founder SecureSave, an emergency savings firm -- do you think that you need to brush up on your financial knowledge?

Wallace asked her what percentage of Americans were she believed to be financially illiterate. She replied, "Truthfully probably 95%."

What does this mean?

"I tell someone to do a Roth IRA. They have no idea what I am talking about. They have no idea. They don't even have a will. They do not have a will. They do not have an advance directive or a durable health care power of attorney. They don't understand what a 529 is. They don't know."

You're not the only one who didn't understand some of these terms. Wallace himself admitted not knowing them all.

Knowing this list of financial terms doesn't guarantee that you are financially literate. Here's a primer for those who are in Wallace's position.

Retirement savings

How do you save for your retirement? Your best option is to invest your money in an account that offers you a tax deduction for saving.

Accounts that are referred to as "traditional" include

401(k)s

You can also find out more about the following:

Individual Retirement Accounts

You get a tax deduction up front. Each dollar invested in these funds counts towards your taxable income during the year of investment. You will owe taxes on your money if you withdraw it at retirement in exchange for the benefit.

Roth Versions

These accounts operate in reverse. These accounts don't affect your taxable income because you have already paid tax on the money that you use to fund them. If you are 59 1/2 years old and you have held your account for five years or more, you can withdraw money tax-free in retirement.

Your personal financial situation will determine which account you should choose, but in general,

Orman is a proponent of Roth accounts

Due to the flexibility that the accounts offer you, they are a great way to save for retirement.

Estate planning

Estate planning includes a will, durable power of attorney, and advanced directive.

You should have an estate planning even if you do not have many assets. This is because the government will decide what happens to your possessions and money if you die.

The easiest document to create is a will. This specifies how your assets should be distributed upon death. You can find templates for free at websites like LawDepot.com.

Sheryl Garrett is a certified financial planner, founder of the Garrett Planning Network and a certified will writer.

CNBC reported last year

.

This form will allow you to name an executor for your estate and list your assets. You can also designate a guardian in the case of dependent children.

Advance directives and powers of attorney allow you to specify who will make decisions for you in terms of health care, finances and other matters if you are incapacitated.

Similar to a will in estate planning, a trust allows you to pass on property and wealth. They are more beneficial if your estate is complex, for example if you want to transfer real estate in several states.

It may be advisable to combine some or all these documents, depending on your circumstances. Even the most financial literate of us should consult an estate planning attorney.

Save for Education

The so-called 529 plan (nicknamed for their Internal Revenue Service code), is a tax-advantaged investing vehicle geared towards people who wish to save money for their child's future education. These accounts allow you to contribute after-tax dollars, while the investments grow tax-free.

You'll need to withdraw money from your account to pay for qualified educational expenses. These include

Not just for college tuition

Costs for secondary and primary school as well as costs of trade school and apprentice expenses.

Some states also offer a tax credit or deduction for contributions. Contributions are accepted in all states.

Each plan offers different investment options

You'll only get tax benefits if you invest in the plan of your home state.

Bottom line: "Don't be dumb"

You don't have to be a financial illiterate just because you don't know a particular term. Financial concepts are not taught in schools.

Orman stated that it should be mandatory for students to understand the student loan system. Orman said, "It's mandatory that you know what student loans are."

compounding interest

What and how

Your youth can contribute to millions in long-term savings

."

If you don't know this stuff and it makes you feel stupid again, you are in good company.

Wallace said to Orman, "You made me feel dumb in only a few areas."

Orman told me, "Don't be stupid." Orman said, "Come and see me."

You don't have Suze orman at your fingertips for financial advice?

Talk to a financial adviser

.

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