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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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 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.
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.