We Owe it to Consumers to Foster Financial Literacy In honor of Financial Literacy Month, here's how brands and banks can help consumers foster greater financial knowledge and confidence.
By David Nelsen Edited by Kara McIntyre
Opinions expressed by Entrepreneur contributors are their own.
Happy Financial Literacy Month! Okay, maybe this isn't the sort of holiday we celebrate in the traditional cake and confetti sense, but for the teams working in the financial sector, it should be one we think about most days of the year: how can we move the needle on everyday consumers' knowledge of — and confidence with — their money?
An ownership economy and financial literacy
At Bumped, our mission to create an ownership economy is inherently tied to increasing financial literacy. Think about it; only about half of Americans are invested in the stock market, and to change that number we need to do more than just provide the technology and access point. We have to change how people think and feel about traditional financial systems like the stock market. Financial technology can treat the symptom, but financial literacy is how we address the root cause.
Take the 77% of Americans who report feeling anxious about their financial situation. That anxiety is about fundamental finances: not having enough money to retire, keeping up with the cost of living and managing debt levels. How can the vast majority of Americans be bothered to self-educate and inform on things like stocks, crypto or retirement accounts when they're facing more immediate stressors?
Related: Financial Literacy is Not Taught in Schools: Here's How It Can Be Learned
Our responsibility to financial literacy
People's relationships with money are rarely intentional. They inherit bits and pieces from parental figures and cobble the rest together through hard lessons. They actively ignore bank accounts out of fear or frustration, when engaging with it could help them understand their finances and build confidence. They put off investing because they don't know where to start, and the idea of putting personal capital at risk is too much in a world where less than half of Americans have the savings to cover a $1,000 emergency.
In fact, 29% of Americans say they don't feel comfortable simply asking questions about a financial service or product. That means even though the tools and resources exist — banks, investing apps, budgeting tools, roboadvisors — people aren't proactively seeking more information. The lingering taboo of talking about money outweighs their curiosity.
That's where we as financial technology companies have a unique opportunity — and responsibility — to continually bring education to the forefront of our consumer interactions.
Related: How Entrepreneurs Can Manage Their Business Finances With Success
Education through participation
If your company promises ease of financial management, you have the opportunity to deliver education and empowerment, too. At Bumped, we call this "education through participation." As a platform, we built the ability for brands and financial institutions to reward their customers in fractional shares of stock. This creates access to the stock market and ownership that doesn't require the consumer to put their own additional capital down to purchase shares. They simply receive fractional ownership for their everyday spending.
Access for folks who may not have excess personal capital is a great step in increasing stock market accessibility (the symptom), but educating folks on what ownership means, how it can affect them, and what it may do for them is what increases confidence and financial literacy (the cause).
So how can financial organizations work to educate and inform? I recommend starting with educating via three key paths: product, content and user engagement.
Education via product: Look for opportunities to weave consumer education directly into your product and user experience. That could look like an explainer video that walks your user through the onboarding process, modules that break down industry jargon or even pop-up visuals that explain what a transaction or reward means for them. Making information and insights more accessible to all your users means that those consumers who don't have pre-existing financial knowledge can now feel more informed.
Education via content: Customer lifecycle — how, when, and what you communicate to your users — should never be simply for the sake of sending an email or push notification. Build intentional touch-points that provide context for your users. If you're notifying them about a transaction, a reward, or a change in their account, explain it or link to a support article with more detail. Make informational content about your industry readily available via a blog, or even an opt-in newsletter.
Education via user engagement: If you've laid the proper groundwork and made informative, educational touch points throughout the user journey, there comes a time to make them part of the conversation. Survey your users, encourage them to ask questions or identify gaps, and then respond by answering and addressing those, ideally in a public forum where others can learn and be encouraged to bring their own curiosities about finances forward.
When put into action, these paths can lead to even more innovation to make financial literacy more accessible. For our team it's meant informative videos, an educational hub and even our own "advice" column for curiosity about stock rewards, all of which have led to a cycle of informing, educating and inviting more conversation from our users.
By understanding the role your organization plays in financial empowerment, you can create resources that encourage financial literacy at the same time. Cheers to the virtuous cycle of access, empowerment and financial literacy.
