Beginner’s Guide: Using Technology to Improve Financial Literacy and Generational Wealth
Are you confident about your personal finance? What about the financial stability of your business? A recent report on the Financial Literary Crisis in America has found that many U.S. citizens are not confident about their money. According to the report, 75% of Americans often or sometimes feel stressed because of money. The Financial Industry Regulatory Authority also notes that “only about one-third of Americans have a working understanding of interest rates, mortgage rates, and financial risk,” which is a 19% decrease over the last 10 years.
An article by Forbes has revealed that over 72% of small business owners and entrepreneurs say they feel overwhelmed with managing company finances. This is often related to a lack of strategic planning, poor budget management, not considering how to create future wealth opportunities, and not being prepared for economic downturns.
What is the solution to the financial literacy crisis in the U.S? The answer is technology. This article will provide the various ways tech is breaking barriers for communities and individuals, allowing them to improve their financial literacy and generational wealth.
1. Educating and Engaging Communities
Individual and community-wide education efforts are essential to guide strong financial literacy and generational wealth management. Despite this, the U.S. is still falling behind when it comes to financial literacy, which in turn widely impacts the well-being of individuals and families, particularly underserved and minority communities. Experian’s Senior Director of Public Education, Rod Griffin, notes that the company partners with the Jump$start Coalition to actively engage the financial services community, non-profit organizations, and schools in supporting consumer education efforts. This can mean providing community resources that support affordable rent, improving credit scores with Experian Boost, and ensuring that students are prepared to take control of their financial responsibilities and long-term wealth. Meanwhile, financial institutions can provide the right tools and resources available to the community, which further promotes financial literacy and wealth management.
2. Providing Resources for Financial Institutions
One digital lending platform provider, MeridianLink, has worked with over 2,000 banks, credit unions, fintech companies, and other financial institutions to provide powerful tools that address consumer concerns surrounding debt, credit card debt, and mortgage. According to Chris Maloof, the Go-To-Market President of MeridianLink®, the company works to help these institutions better serve customers in times of uncertainty and “Strategically grow account openings, proactively manage consumer debt, and quickly provide personalized pre-screened offers to those who need it most.” Meanwhile, the Federal Deposit Insurance Corporation leads the FIDC Money Smart financial education program that helps individuals of all ages grow and improve their financial skills and establish positive, lifelong banking relationships.
3. Leveraging Wealth Tech to Invest and Save
Wealth tech, much like direct indexing and tax solutions, is currently transforming systematic and dynamic resource allocation for many businesses. Wealth tech is a new technology that includes apps, smartwatches, and software platforms, designed to help consumers with financial management and investment planning. Wealth technologies are increasingly attracting millennials and Gen-Z consumers. Yet, older generations are also drawn to the enhanced usability, user experience, and guided financial support that is offered. Wealth tech provides an easily accessible and affordable way for consumers to make good financial decisions, including money management and investment strategies for now and in the future.
4. Hyper-Personalized Financial Experiences
Financial technology companies provide hyper-personalized tools that provide a solid outlook of a consumer’s overall financial status. They deliver resources and insights that help them make truly meaningful and influential financial decisions. Using their smartphone or computer, consumers can authorize fintech companies to access and analyze their financial data. This delivers a real-time, personalized view of their financial status when it comes to spending, saving, investing, and borrowing. Paired with engaging community education efforts and financial institution resources, fintech companies provide clear and transparent content and go a step further in building consumer confidence when it comes to money. In fact, according to Plaid’s 2022 Consumer Survey, 48% of consumers said that fintech helped them feel in control of their finances last year, ultimately helping consumers build short- and long-term goals through personalized financial planning.
5. Improving Business and HR Practices
Businesses that integrate financial software and programs into their traditional enterprise resource planning (ERP) systems are able to gather and analyze financial data more effectively and deliver insights into needed financial or process improvements. The continuous collection of the company’s financial data allows for a greater understanding of the current financial state and future opportunities. In addition, according to a survey conducted by the International Foundation of Employee Benefit Plans, employees are more financially savvy when businesses provide financial education programs. Employees today want access to financial literacy education, employee assistance programs (EAPs), and mental health support programs that can guide them in shaping and managing their futures. By incorporating new technologies and financial education programs company-wide, employees are more likely to be productive and focused on their work instead of stressing about their financial situation. This will lead to greater employee retention rates and stronger decision-making that leads to heightened profitability and growth.
Innovation in technology is doing its part to reduce the impact of the current economic environment, discrimination, and credit conditions, impacting the financial well-being of American families. From financial community partnerships to digital lending platforms and fintech and wealth technologies, the use of technology to educate populations about improved financial literacy and generational wealth is steadily becoming a promising stronghold for everyday consumers.
