How confident are you when it comes to 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, with 75% of Americans often or sometimes feeling 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 also 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.
So how can Americans learn to create personal wealth and improve financial literacy opportunities across their communities? The answer: technology.
While financial literacy is a growing problem across America, financial literacy education with the help of tech and community programs has the power to close America’s wealth gap. This article will provide the various ways tech is breaking barriers for communities and individuals, allowing them better financial literacy and growth opportunities.
1. Educating and Engaging Communities
Individual and community-wide education efforts are essential to guiding 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.
This extensive and growing gap has promoted many high-profile businesses, including The Walt Disney Company and Delta Air Lines, to address the systemic and societal barriers that have prevented underserved communities with less access to wealth generation. According to Experian’s Senior Director of Public Education, Rod Griffin, 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.
For non-profits, this can mean providing community resources that support affordable rent. In turn, these improve credit scores with Experian Boost. For schools, it means ensuring that students are prepared to leave high school. Then, able to take control of their financial responsibilities and long-term wealth. Meanwhile, for financial institutions, this means having the right tools and resources available to the community. This way, it 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 (52%), credit card debt (33%), and mortgage (19%). 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.”
Likewise, 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. The FDIC Money Smart Alliance also provides valuable tools for financial institutions themselves. Those looking to learn, collaborate, and grow with other organizations to help their local community.
3. Leveraging Wealth Tech to Invest and Save
According to McKinsey & Company, post-pandemic recovery across the U.S. includes using technology to meet the changing social environment and consumer needs that impact the wealth management ecosystem. 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. They are 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.
Mature audiences may still seek out Hedge Fund Managers and traditional savings options. But, wealth tech provides an easily accessible and affordable way for consumers to make good financial decisions. These decisions include money management and investment strategies for now and in the future.
4. Hyper-Personalized Financial Experiences
Financial management is difficult for most of us. This is true whether you are trying to run a business, live paycheck-to-paycheck, or are investing for retirement. But with the right financial education, we all have the capacity and capability to improve our financial experience and well-being. This is where fintech comes into play.
Financial technology companies provide hyper-personalized tools. These are designed to provide a solid outlook of a consumer’s overall financial status. They also 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. This is accomplished particularly through profit tracking, accounts payable data, and risk management.
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 are not simply looking for traditional benefits and insurance. They want to have access to financial literacy education, employee assistance programs (EAPs), and mental health support programs that can guide employees in shaping and managing their futures.
By incorporating new technologies and financial education programs company-wide, employees are more likely to be more productive and focused on their work instead of stressing about their financial situation. With this, business leaders and entrepreneurs will see greater employee retention rates. Plus, they’ll see stronger decision-making that leads to heightened profitability and growth.
Innovation in technology is doing its part. It reduces the impact of the current economic environment, discrimination, and credit conditions. Many of which impact 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.