Can (Financial) Ignorance Be Bliss?

Financial illiteracy is widespread and leads to bad financial decisions. Individuals cannot answer basic questions about inflation, compounding, and diversification. This paper argues that financial literacy programs be complemented with new financial instruments that embed goal-specific compounding and inflation protection. These interest-only real bonds, with a forward start date, would pay coupons for the period required for the respective goal. Further, there is ample potential supply from natural issuers. This innovation trivializes the investment problem to just simple multiplication or division thereby addressing the challenge of financial illiteracy with financial innovation across a range of saving/investment goals!