5 Ways Technology is Helping Improve Financial Literacy

With the rise of energy bills, an ever more worrying cost-of-living crisis, and inflation at an all-time high, it has never been more important to be financially educated.

Financial education isn’t just for business and economics graduates, in fact, having a solid understanding of finances is crucial, especially in light of the pandemic.

Being financially literate means being able to manage money well, make informed financial decisions, and plan for the future in order to live a more intentional and stress-free life. In many respects, technology is enabling this.

An Overview of Financial Literacy

• Current UK Statistics

A study from Money Advice Service has found that 39% of adults in the UK (20.3 million) lack confidence in their ability to manage their finances, 11.5 million have less than £100 in savings, and nearly nine million Britons are in serious debt; yet only around a third receive assistance.

The Money Charity has found that the average total debt per household, including mortgages, was £64,970 in 2022.

According to the Office for National Statistics, 89% of adults in Great Britain reported an increase in their cost of living in August 2022. Moreover, real household earnings are anticipated to decline.

According to the Resolution Foundation, the poorest fifth of households will need to reduce non-essential spending by 24% between January and March 2023 in order to cover the increase in energy costs.

• The link between mental health & financial wellbeing

As well as the current UK statistics being quite concerning, Brits are also facing a substantial well-being challenge. A recent survey from Mintago of 1,024 UK adults in full-time employment has found that almost two-thirds (63%) of participants have seen a decline in their financial condition since the start of 2022.

Unfortunately, the research points to a link between people’s mental health and the worsening of their financial circumstances.

The majority of Britons (56%) now identify their personal finances as their biggest source of stress. Worryingly, over eight in ten (82%) UK respondents say they would be financially unprepared if their work status were to suddenly change. Another 70% of people are worried that their financial condition will get worse in the near future.

The above overview can be quite worrying, considering that poor money management and low financial literacy could mean a higher proportion of people living in poverty.

The Importance of Financial Literacy

We need to have the knowledge and skills necessary to handle our finances efficiently, which is why financial literacy is crucial. Without it, we lack a strong foundation for success in our financial decisions and the actions we take — or don’t take.

Better financial literacy from a young age may be advantageous, particularly in terms of debt prevention, according to several pieces of research.

According to the Allianz study, those who have a thorough awareness of financial concepts and risks are twice as likely to manage their money and make better financial decisions than those who do not.

Similar to this, the degree of financial literacy has a positive impact on how households manage their money, especially their capacity to create and achieve long-term financial goals.

Being financially literate is crucial as it enables one to comprehend and make the most of their money, regardless of income level. It aids people in taking control of their finances and becoming financially healthier.

The Support of Technology

1. Financial Resources

There are a plethora of resources online, from blogs and videos to courses and ebooks.

In the past, when access to financial knowledge was limited, people frequently relied on either personal experience or advice from friends and relatives — now everything may be learned online due to the increased accessibility of information.

More individuals are being exposed to a well-rounded financial education due to the growing exposure of new financial literacy options and the diverse media in which it’s available. In fact, more and more magazines are creating specific money columns to help people tackle everyday financial queries.

2. Mobile Apps

Nowadays, there is a growing number of financial mobile apps on the market, all varying across a range of industries.

People are able to open online-only banks with just a click or check their daily spending in real-time. Most of these apps also have an automatic penny roundup, which makes it easier for individuals to save money through their spare change. All these applications are trying to make managing finances easier and more accessible.

Not only that but there are also several apps dedicated to cashback schemes or created with the purpose of finding great discounts. Some help individuals aggregate their financial information for a better overview of their situation, while others help people find lost pension pots, as well as provide them with free financial coaching.

These are all tools and information that can guide people into making wiser money decisions.

3. HR Financial Benefits

An interesting trend, as more employees seek better workplace benefits to improve their quality of life, most companies are evolving to provide their staff with better perks than the usual free gym memberships.

Particularly in the post-covid era, with heightened remote work opportunities, many companies have begun using technology to provide their employees with better financial education and mental health support. The current climate is challenging for both businesses and individuals, so it is crucial that HR departments look to support their employees’ financial well-being rather than with only a simple retirement plan.

For instance, certain platforms enable users to view a variety of financial information, including their pensions and numerous banking accounts, in one platform, while also offering those who require it financial guidance.

As a result, people will have a better understanding of their finances as a whole and be able to make better financial decisions. Not only that but less stressed individuals make for a happier, healthier, and more productive workforce.

4. Free Online Advice

There are plenty of institutions that will help individuals get free online advice. From free money and pensions guidance to free, flexible debt advice that is based on a comprehensive assessment of an individual’s situation - there is something for (almost) every situation.

These are just some of the other options that people have when looking to take control of their financial health.

5. Business Learning Hubs

Many financial services businesses are embracing the benefits of having their own learning hubs dedicated to customers. This is obviously a great initiative.

Some great examples are certain crypto exchange platforms that have extensive guides and explainers for the average user — think crypto basics, crypto glossary, as well as many other articles talking about NFTs, and everything related to the crypto world.

Another great example is some companies’ dedication to pensions. Most have an extensive pension 101 library, with lots of videos, FAQs, as well as a Pension Academy that claims to make you become a pension pro in 30 minutes.

By scrolling through other companies, you will be able to find a plethora of information and educational material based on what that specific company is offering — think pension providers, debt advisors, and more.

Many other businesses are joining in the (very positive) content strategy. Although this is a great business strategy to help less-knowledgeable users buy into what the business is selling, it is also helping to improve financial literacy.

Conclusion

In conclusion, there are many ways that tech can and is helping improve financial literacy — the above are just a few examples. Sure, the ever-evolving technology landscape means that it has also become very easy to spend hard-earned money with contactless payments or Buy Now Pay Later options.

Increasing financial literacy also means equipping individuals with the tools and information needed to make smart decisions.

The rise of financial advice and education enables individuals to take control of their finances and improve society as a whole. However, due to the undeniable link between mental health and financial wellbeing, employers play a key role in providing access to financial & pension wellbeing technology in the workplace.