As the year begins and financial resolutions are made, financial wellness becomes top of mind for many. For good reason, since only half of the US population is financially literate, according to the 6th annual survey from the TIAA Institute and Global Financial Literacy Excellence Center (GFLEC). This has remained fairly constant throughout the past six years, which is somewhat alarming, considering the fast pace of real-time payments and the rise of cryptocurrency. Financial institutions (FIs) may want to take note.
While financial literacy levels have been stagnant, the inspiring news is that financial education drives up financial literacy, which in turn positively affects financial wellness. In boosting financial education in their communities, FIs can help enable more responsible and savvy banking customers.
After all, helping consumers better understand the basics of personal finance, such as budgeting, investing, and borrowing, can help them advance their financial goals more wisely. Planning for family trips, saving for that unexpected emergency, and putting money aside for a down payment are important goals that can be reached successfully through financial well-being.
Here are three ways to help increase the financial wellness of customers and members.
1. Educate Early
Educating early in a person’s financial life reaps the greatest results and helps to fill current learning gaps. The TIAA-GFLEC survey found that the younger generations have lower literacy rates—only 42% of Gen Zers and 46% of Millennials were considered financially literate vs. 54% of Boomers. This gives institutions a perfect opportunity to educate early, sowing the seeds of financial wellness to help younger generations make more informed future decisions. In fact, research by the Brookings Institute has found that “teenage financial literacy is positively correlated with asset accumulation and net worth at age 25.” So, influencing the children of customers or members can pay off, both for them and their primary financial institution.
2. Cultivate Trust
After receiving overwhelming support during the pandemic, 73% of consumers report that they trust their financial institutions. Keeping trust levels high has many benefits and creates the right environment for financial education. When consumers put their trust in an organization, they rely on them for relevant and helpful information.
For instance, a customer or member is interested in applying for a credit card online. Trusting their primary financial institution, they browse the options on its website. Easily understanding how to compare credit cards using APR, fees, and rewards helps a less financially-savvy digital visitor make more sound decisions. Plus, they feel that the FI is supporting them with their financial needs and the level of trust keeps growing.
3. Optimize Digital Channels
Over 90% of the US population is using the internet, so FIs have a perfect opportunity to use digital channels to educate consumers financially and build financial well-being. Digital banking portals, mobile apps, websites, and social media channels can all be used to provide valuable financial education content. For instance, videos on interest rate effects, online budgeting calculators, and virtual assistants prepared to answer a variety of banking inquiries provide a rich and accessible way for customers and members to obtain information and learn.
Engaging customers and members with these types of digital tools increases satisfaction too. According to J.D. Power, satisfaction can rise 200 points higher for those actively using these tools vs. those who are not. Ensuring that the right tools provide the right information for digital users will help maximize the satisfaction result.
Financial institutions have a prime opportunity to influence the financial literacy of their communities. Providing valuable information when it is needed not only educates, but also strengthens financial wellness. And having financially fit customers and members is definitely a goal for FIs, not just in the New Year, but throughout every year.
Interested in providing more financial education to increase the financial wellness of your communities? Find out how to use specialized Glia Virtual Assistants to do just that.
