Technology and Financial Literacy: How to Simplify Learning About Money

Table of Contents

1. What Role Does Technology Play in Enhancing Financial Literacy?

2. What Financial Literacy Issues Can Technology Help You Learn?

3. How Does Technology Make Financial Education More Accessible to Underserved Communities?

4. What Are the Potential Risks Associated with Using Technology for Financial Learning?
5. How to Protect Yourself When Using Financial Technology
6. What Are Some Popular Platforms or Resources for Improving Financial Literacy?
7. How Is Technology Expected to Shape the Future of Financial Literacy Education?

April is Financial Literacy Month, so it’s no surprise that financial education is on our minds.

Learning about money is the cornerstone of financial wellness and the key to achieving your most important financial goals. Whether you’re saving to buy your first house, working out a plan to pay off your student loans, or just want to splash out on some personal expenses, financial literacy is a must for financial stability.

Since technology has become increasingly important in the world of finance, it makes sense to ask how technology can help you learn about money, credit, and debt. In this article, we’ll explain how technology can assist you with personal finance decisions, when and how to use it on your financial journey, the risks involved, and much more.

What Role Does Technology Play in Enhancing Financial Literacy?

Our world is increasingly reliant on technology, so it should come as no surprise that technology is playing its part in increasing financial knowledge.

Technology, including financial apps, websites and online courses, puts financial education at our fingertips. According to the Pew Research Center, 98% of Americans own a cell phone and 91% have a smartphone, which means that technology to help with financial literacy is widely available.

It’s become easy to spend money with technological advances such as mobile wallets and tap to pay credit and debit cards. Since spending is easy, things like budgeting and creating a plan to get out of debt should be, too. 

Another aspect of technology that’s helping with financial literacy is gamification. Both kids and adults have interest in games and there are some money apps that turn things like saving money, creating a budget, or investing, into a fun activity.

What Financial Literacy Issues Can Technology Help You Learn?

If you’ve never used a financial product, like an app or educational website, before, you might be wondering how they can help you improve your financial literacy.

Let’s start with spending and saving. There are many budgeting and spending apps available that can help you understand your spending habits and then, create a monthly budget based on your income and expenses and save toward any financial future. You can learn how to balance your lines of credit without slipping into debt. We’ll give you some examples later in this article.

Understanding and preparing taxes is another area where financial literacy is essential. People who don’t understand things like withholding, tax deductions and tax credits may overpay. You'll also want to learn more about your credit score, which improves as you pay off your debt. Your credit score will impact some of your financial decisions, like your odds of getting lines of credit.

Retirement saving and investing go hand in hand, and investment apps, including digital brokerages, often provide educational resources to help people learn the ins and outs of investing in the stock market. They may also provide specific accounts, including mutual funds, to help people reach their financial goal. It's also important to have a buffer of savings for your day to day in the case of unexpected expenses, so you don't fall behind on your regular debt.

Building financial literacy early in life is one of the best ways to ensure financial wellness. There are many financial apps and tools designed especially for kids, including budgeting and spending apps and tools to teach kids the importance of saving money and investing it.

How Does Technology Make Financial Education More Accessible to Underserved Communities?

Financial education must be accessible in order to help people. Financial literacy in the US has remained stagnant at just about 50%, according to the World Economic Forum. People in underserved communities are more likely to lack knowledge of basic financial concepts, and that leads to:

• Fewer financial skills 
• Low (or no) retirement savings
• Low credit scores
• Lower likelihood of making informed financial decisions
• High rates of credit card debt

One example of how a lack of financial literacy can impact people is the housing crisis of 2007-2008. Many first-time homeowners signed up for adjustable rate mortgages (ARMs) without understanding how that could impact their interest rates and monthly payments.

Many young people just starting out, find themselves burdened with student loans that come with a poor interest rate. This can lead to a lifetime of debt that could have been easily avoided with advice from expert financial educators.

Technology gives people access to financial information when and where they need it. They don’t need to have a financial advisor to learn about money management, debt or opening an investment account. They can do that with an app.

What Are the Potential Risks Associated with Using Technology for Financial Learning?

Before anybody uses technology for financial learning, it’s necessary to understand the potential risks that are involved. Any time you’re inputting personal information – something that may be necessary with some financial apps – you should make sure that your data is safe. Here are some risks to be aware of.

• Privacy issues are some of the most common when using personal finance apps. Some financial institution apps share information about you with third parties. An example is Nerd Wallet: Manage Your Money, which shares both your credit score and purchase history.
• One issue with person-to-person (P2P) apps such as Venmo or CashApp is that you risk sending money to the wrong person. If you do, it may be impossible to get it back since these apps are notorious for poor customer service.
• A lost phone or tablet with finance apps on it could expose you to theft or fraud if you’re not careful. Since some apps require only a tap to access your money, someone could send a payment to themselves or take your personal information and use it for identity theft.
• Inaccurate information isn’t a criminal issue, but it is something to be aware of when you’re using financial apps and websites. Not all information is correct. Since it has become increasingly common for people to use AI tools to manage their finances, you should also be aware that, while the technology is improving rapidly, there’s still a risk that it might give you outdated or inaccurate information. 

These risks shouldn’t scare you away, but we hope they’ll make you an informed and appropriately cautious user of money apps and other technology.

How to Protect Yourself When Using Financial Technology

Since we’ve given you the risks of using technology to increase your financial literacy and manage your money, here are some pointers to help you protect yourself.

1. Research first and steer clear of any tech that doesn’t protect your privacy. Read reviews and articles to find the apps that protect users.
2. If an app or website gives you the choice to opt out of sharing your information with third parties, take advantage of it.
3. Set strong passwords and don’t reuse them. 
4. Enable two-factor authentication on your mobile devices. The most effective form of 2FA is a biometric scan, such as a fingerprint or facial recognition. 
5. Set your phone or tablet to lock after a few minutes of inactivity. That way if you lose it or it gets stolen, there’s less of a chance that someone will be able to access your information.
6. Review privacy settings in any app and change them to protect your information. For example, Venmo defaults to a public setting for payments, but you can change it to be visible only to your friends or only to you. We recommend the latter.
7. Don’t let other people use your phone or tablet unless you’re completely confident they won’t try to access your bank account or savings account.

These are all practical steps you can take to protect yourself. They’re easy to do and we recommend them to ensure your privacy and financial security.

What Are Some Popular Platforms or Resources for Improving Financial Literacy?

We encourage you to do your own research before using any platform, app or resource to improve your financial literacy, but here are a few that are well reviewed and worth checking out.

• Quicken Simplifi is a budgeting and saving app that can help you manage your spending and work toward financial goals, like lowering debt. 
• Rocket Money is an app that can help you keep track of your subscriptions and cancel the ones you don’t want.
• Greenlight is a money app for kids that teaches them about budgeting and saving, and it even provides them with a debit card where parents can set spending limits.
• Acorns is a simple investment app that can teach you about microinvesting, coin values, and help you build a portfolio.

You can also check if your local financial institution has an app, which can be convenient for consolidating your financial statements.

These are just a few of the most popular financial literacy apps.  Websites to consider include Motley Fool for learning about the stock market and investing and of course, Addition Financial’s Financial Education center, which has blog posts about credit and credit cards, debt, saving, investing and much more.

How Is Technology Expected to Shape the Future of Financial Literacy Education?

It’s a safe bet that technology will play a significant role in the future of financial literacy and education. The question is, how will it do so and what can you expect?

We’re not psychic, but we feel confident that AI is going to continue to improve and more people will rely on it to help them with financial management and reaching financial goals. There are kinks to be worked out in terms of making sure that AI delivers valuable insights but it’s likely that will happen.

We expect to see more integration between different financial topics and apps that allow people to manage everything in one place. Users may prefer a streamlined solution that makes it easy to track spending, save money, work toward decreasing debt, plan for retirement, and invest (and manage investments) with one tool.

We can’t predict everything that will happen, but we can say that getting comfortable with financial technology is going to be useful going forward as technology plays an increasingly large role in both financial literacy and personal finance management.

Start Improving Your Financial Literacy Today

Financial literacy is essential for financial success which means it’s time to check out some of the money management and educational tools available and choose the ones that are right for you. Don't let your financial well being come down to a coin flip, take control of your financial situation with well rounded knowledge.

We hope this article has empowered you to do exactly that. If you want to kickstart your financial literacy today, check out our Financial Education hub.