It’s today’s world, many people are quick to judge that financial education doesn’t work.&nbsp; From venture capitalists to research thought leaders, many are questioning the effectiveness of current financial education programs. Some may say that the average person doesn’t want to learn personal finance, while others assert it’s the educational programs that are deficient because they focus too much on math and mechanics, as opposed to tangible and practical value. And then others claim that financial education fails, no matter who the teacher is because it’s really your personality that controls your financial behavior and decisions. So who’s right?&nbsp; For many US young adults, personal finance education is nothing short of confusing, haphazard and complicated—in part because it’s not taught in schools. The average college grad, carrying $29K of student and $6K of credit card debt, enters the workforce without a clear roadmap for tackling their debt and negative net worth. What ensues next is the start of a random and roundabout financial education journey that involves google searches, reading blog posts, and watching YouTube or TikTok, until exhaustion.&nbsp; It’s a journey full of jargon, occasional misconceptions and affiliate marketing deals:&nbsp; a 23-year-old looking to repay (government-backed) student loans will soon come across a debt consolidation offer via a private student loan with low monthly payments.&nbsp;&nbsp; At this point, some form of financial education could actually be helpful, and in particular:&nbsp;&nbsp; <ul><li>Having a frame of reference for how to think about financial issues.</li><li>Understanding the types of student loans, the pros and cons of each type, and how personal loans work—all basic stuff that most Americans don’t get to learn about before they actually encounter it in real life.</li><li>The fundamentals of loans: interest rates, monthly payments, the financial impact of missed payments, payback time, and total interest paid.&nbsp;&nbsp; </li></ul>What’s adding fuel to the fire are attitudes and beliefs surrounding the young borrower, which may manifest like this: <ul><li>Everyone’s got some debt, and yeah, they’re fine. So, I’ll be fine too.&nbsp;</li><li>What is money worth, if not for experiences? Wanna go to the Bahamas?</li><li>I’m just starting my career. In the next couple of years, I’ll be doubling my current pay.</li></ul>In other words, unrealistic expectations, social pressure, and lifestyle creep all add to a young person’s financial stress. It’s no wonder that half of Americans live paycheck to paycheck, can’t save $400 for emergencies, and trade on margin as they’re learning about stocks.&nbsp; Let’s break things down. Financial wellbeing—the opposite of financial stress—is driven by two things: financial education and financial behavior.&nbsp; Both are necessary to manage and contain financial stress. It’s easy to blame poor money habits for poor financial health, but what about education?The current state of formal financial education is as follows:&nbsp; <ul><li>Only 1 in 6 US high school students is required to take a personal finance class.&nbsp; That figure is even worse among low-income students—only 3.9% of them were required to take personal finance in high school.&nbsp;</li><li>Financial literacy curriculum is by and large focused on concepts and vocabulary building.&nbsp; It’s heavy on math and mechanics, and light on practical applications of personal finance to real life.&nbsp;&nbsp;</li><li>Occasionally, it comes across as rigid and clashes with social values and norms. &nbsp;How many times are you going to hear that you should never buy a latte in a coffee shop because it’s a waste of money? And that bitcoin is a big gamble, not an investment?</li><li>Financial education often ignores behavioral finance. Instead of teaching our kids about emotions in investing, we lecture them on asset classes and discounted cash flows.&nbsp;&nbsp;</li><li>Perhaps the most critical piece: we don’t teach personal finance when people need it the most, in young adulthood. Teaching it in high school is fine as an introductory class, but most of us need it when the rubber hits the road—the first time we’re on our own and earning that first paycheck.&nbsp; </li></ul>In lieu of formal financial education, what many young adults wind up resorting to is less formal, predominantly internet-based education, aided by Google searches, bloggers, YouTubers, Instagram, and TikTok influencers. This type of “instant” education has low barriers to entry, and the content that people consume will vary from helpful and informative to sometimes misleading, and could be very entertaining!In particular, here are some challenges with informal financial education:&nbsp; <ul><li>Lacks a common framework for acquiring new finance skills.&nbsp; Have you heard a story about a teenager wondering how to start investing, only to find themselves trading commodity options? The education on the internet feels like ripped-out pages of a college textbook, with no particular order whatsoever, so good luck telling apart the first chapter from the last!&nbsp;</li><li>Long-form content. It’s a well-known thing that search engines prefer long articles as opposed to short ones when it comes to search results ranking. Some bloggers will go as far as saying that your article should be at least 1,800 words long if you want it to be ranked as a top search result on Google. Unfortunately, longer is not always better for the user.&nbsp; Oftentimes, the extra content not related to a user’s search can confuse them, leading to more questions than answers.&nbsp;&nbsp;</li><li>Use of jargon. Some authors like using jargon because they sound more professional and expert-like. In fact, authors are the only ones to blame—the whole financial services industry is full of jargon. Is a mortgage the same thing as a property loan? And bond coupon the same thing as interest paid? The financial terms are nuanced, and certainly, some words deserve to exist, but for consumers, they are sometimes an unnecessary source of confusion.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</li><li>Facts vs. marketing: Almost every blog on the internet covering personal finance contains affiliate marketing offers. Bloggers are not to blame though—they, like other people, need a source of income to simply get by. What’s problematic though is when affiliate offers are inserted in such a way that the user has no idea whether they’re getting “straight scoop” or an ad—and this happens way too often.&nbsp;</li><li>Education vs. entertainment.&nbsp; When you consume financial content, you always have to ask: is this education or entertainment?&nbsp; I made this very mistake in year 2,000 when I watched CNBC and took Jim Kramer’s stock picks as gospel.&nbsp; I bought a bunch of stocks he touted at the peak of the market, only to sell them at the bottom in 2002.&nbsp; I simply had no idea that Kramer’s show contains no financial advice--and its primary objective is to entertain.&nbsp; And new generations are repeating the same mistake—who bought meme stocks at their peak?</li></ul>So why does financial education fail today? I believe that:&nbsp;&nbsp;&nbsp; <ul><li>People are right to say it focuses too much on concepts, vocabulary and math, and too little on financial behavior. What’s also lacking is the practical application of financial concepts and frameworks that people can relate to.</li><li>Media outlets (think blogs, financial sites, subreddits, YouTube, and TikTok channels) may prioritize marketing, monetization, and entertainment over providing education—and many consumers are simply not aware of this.</li><li>There is simply too little of it.&nbsp; Only 18% of schools teach the subject that almost everyone uses in life, and it’s even worse for people of low-income backgrounds, who need it the most.&nbsp;&nbsp;&nbsp;</li><li>You don’t get financial education when you need it the most.&nbsp; Financial education has a similar life path to adulting.&nbsp; As a kid, you don’t need it as much, because your parents take care of your basic (financial) needs, but as a young adult, when you’re on your own, you’re scrambling to figure things out.</li></ul>Finally, many don’t realize the relationship between financial education and wealth building. Unlike other types of education (e.g., college, professional certifications or even Coursera courses) that are directly correlated to one’s earnings potential, financial education doesn’t have the same reputation—who on Earth takes a personal finance class to make more money?&nbsp;&nbsp; I’ll leave you with this: There are two important, but subtle ways that personal finance education enhances your wealth. &nbsp;First, it teaches you that your salary, or wage, is not the only source of your income. In fact, for the top one-percenters, that is a minority source.&nbsp; Wealth is built through investments, that compound with time, and by taking calculated risks—a lesson many people learn too late in life. Second, financial education teaches you to manage to the bottom line: it’s not what you make, but what you wind up saving that enhances your wealth. Just like a company, you should care about your profit (i.e., what you keep), and not just about your revenue before all expenses (i.e., your gross income).That said, there are ways to make personal finance education interesting for most—but I’ll save that for my next post, How to Fix Financial Illiteracy.

From venture capitalists to research thought leaders, many are questioning the effectiveness of current financial education programs.  In this post, we'll examine the root causes of financial education failure in the United States—for both formal financial literacy programs and informal, online education.

Why Financial Education Fails Today

Financial wellness solutions are becoming increasingly popular in the workplace, to the point they are being considered a core benefit. US employees are experiencing more stress than ever in their financial lives. The COVID-19 pandemic shed light on this phenomenon, but the reality is that the cost of living, and in particular real estate prices and college tuition, have been rising much faster than the wages of US workers.&nbsp;&nbsp; It’s no wonder then that 62% of US employers feel responsible for their employees' financial wellness—significantly up from 13% in 2013, based on Bank of America's <a href="https://www.benefitplans.baml.com/publish/content/application/pdf/GWMOL/2020-Workplace-Benefits-Report.pdf" target="_blank" rel="nofollow">2020 Workplace Benefits Report</a>. Employers are now more likely to provide tuition repayment assistance, advanced paycheck services, emergency savings match programs and even individual financial counseling, but one benefit stands out in particular—and that’s financial wellness. And that’s because of its potential to address the underlying causes of financial stress that follows employees everywhere they go, including the workplace.&nbsp; <h2>The four types of financial wellness solutions </h2><ul><li>Group-focused webinars and workshops</li><li>Individual financial planning sessions</li><li>Financial content sites</li><li>Community-focused financial education apps </li></ul><img src="https://finny.s3.amazonaws.com/images/a5699ddc-86b7-47ff-af04-f06b7f8c741d.jpg" style="width: 515px;">Group-focused webinars and workshops are probably the most common type of financial wellness solutions today.&nbsp;Those solutions are focused on educating the workforce in a group setting. Providers&nbsp;such as Fidelity, Principal, Metlife or Prudential offer such services, with their core objective to provide informative or advisory content to employees, such as learning how to take the first investment steps to meet their life goals or determining how much life insurance they may need. These services are often offered alongside other paid services such as 401(k) administration, investment advice or insurance products. In contrast to webinars and workshops, individual 1-1 financial planning sessions are focused on creating investment strategies and financial plans with individual employees.&nbsp; Some examples of vendors in this category include Financial Finesse, Brightside, LearnLux, Origin, and North Star Money.&nbsp; Typically employers subscribe to such services on an annual basis, and eligible employees are free to use them throughout the calendar year. The level of utilization of such financial planning services varies by employer, from single-digit numbers to over 50%. Feedback from employers is that such services are valuable, although sometimes expensive.&nbsp;&nbsp; There are also financial content sites that offer resources to employees to peruse on their own time.&nbsp;Nonprofits such as BALANCE or Khan Academy offer such programs, where employees can browse and watch videos, read blog posts, use financial calculators and take financial assessments at their own pace. Some providers, such as AYCO by Goldman Sachs or BALANCE go a step further and offer support by phone or online, although support staff may not be accredited to give financial advice.&nbsp; For these solutions, it is up to users to find and choose the topics they’re interested in, and there is usually no general framework or curriculum that guides users to those areas of personal finance they will most benefit from.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A new, emerging type of financial wellness solution is community-focused financial education apps. This type focuses on personalized financial education, while creating a community for employees to engage in and ask their financial questions. One of the fundamental premises of such solutions is that financial education often lacks a frame of reference, because it’s not taught in schools, so by the time young adults enter the workforce, they mostly don’t have a solid foundation to solve their financial problems. In the absence of specific preferences, users are given a curriculum or learning path to financial literacy. Financial coaches and advisors may also be available to help as they are a part of the community. Finny is an example of such a service.&nbsp; In this model, the community plays an important role, because it allows users to discuss their personal money-related challenges and get feedback from other members and financial coaches..&nbsp; &nbsp; .&nbsp; &nbsp; .Given these models, an increasing number of employers are actually offering more than just one type of financial wellness solution at work. While traditionally employer groups have relied on their retirement savings plan and insurance vendors to provide complementary financial education and wellness programs for the workforce, many employers are looking for new, emerging ways to help their workforce, such as interactive educational programs and 1-1 financial support on a variety of financial topics from creating a budget to fulfilling financial goals like buying a home or funding education.&nbsp;&nbsp; If you’d like to learn more about what <a href="https://www.askfinny.com/workplace" target="_blank">Finny</a> can bring to your organization, and how we can help your employees with their financial education and wellness goals, <a href="https://www.askfinny.com/workplace#get-started" target="_blank">get in touch</a> with the Finny team.&nbsp; Everyone needs financial education, and so do your employees—it’s the foundational layer of financial wellbeing.

Financial wellness solutions are becoming increasingly popular in the workplace, to the point they are being considered a core benefit.  In this blog post, we'll discuss the four types of financial wellness solutions offered to US employers. 

Four Financial Wellness Solution Types for the Workplace

When it comes to personal finance knowledge, the typical&nbsp;American&nbsp;gets barely&nbsp;a passing grade. Since January, more than 18,000 people have taken Finny Gauge, Finny's&nbsp;financial literacy quiz, which covers key&nbsp;financial topics ranging from compound interest and&nbsp;credit scores to the basics of the US taxation system.&nbsp; The average Finny member&nbsp;scored&nbsp;67%.&nbsp; That's a D.Our members first encounter <a href="https://www.askfinny.com/quiz/finny-gauge" target="_blank">Finny Gauge</a> as they&nbsp;embark on their personal finance education journey.&nbsp; Not everyone enjoys taking a literacy&nbsp;test, so&nbsp;we've recently made it optional.&nbsp; We do, however, recommend taking it, as it helps us understand what an individual&nbsp;knows about money, and then&nbsp;we can better customize their curriculum and line up only those lessons that the member will find educational and useful.We've analyzed&nbsp;our members' test scores to understand what they're good at, and what are the things they need help with.&nbsp; We've learned a ton from the analysis.Here's the good news: <ul><li>Most of Finny’s members know that insurance premiums are not refundable.&nbsp;When asked “True or false: with insurance policies, if you never file an insurance claim, you get your money back,” 86% of the respondents knew that this was actually false.</li><li>Most people also know that stocks, on average, are riskier than mutual funds and ETFs.&nbsp;When asked the question “True or false: investing in a company’s stock is usually safer than a stock mutual fund or exchange-traded fund (ETF),” 85% of our members knew that is incorrect. Despite the knowledge of single-stock risks, investors are still betting big on individual stocks. The meme stock movement is likely a result of conscious, risk-loving decision-making!</li></ul>Here’s what the majority of Finny users got right but many still don’t know: <ul><li>73% understand that pre-tax contributions into retirement accounts may reduce your current taxes.</li><li>72% know that your income and assets don’t impact your credit score&nbsp;(at least not in a direct way).</li><li>71% know that a 15-year mortgage usually has higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the mortgage will be lower than that of a 30-year mortgage.</li><li>68% understand that if you put $100 in a non-taxable account yielding 1% a year, after 5 years you’ll have more than $105 in the account.&nbsp;This is also known as the power of compounding returns.</li></ul>Here is what most of our members aren’t so sure about:<ul><li>Tuition deductibility.&nbsp;Say you have a child in a private elementary school. True or false: their tuition is tax-deductible? 48% answered that it’s not, which is the correct answer.</li><li>Rule of 72.&nbsp;It helps you estimate how long it takes for your money to double in value. Let’s imagine you have a $1,000 credit card balance, and the interest rate you’re charged is 15% per year compounded annually. If you don’t pay this credit card balance at all, do you know how many years it’ll take for your balance to double to $2,000? Only 36% know that it will take between 3 and 5 years. And here is the math according to the rule of 72: 72/15=4.8 years.</li></ul>Here is the summary of Finny's&nbsp;financial literacy test scores by topic:<img src="https://finny.s3.amazonaws.com/images/4f9999ec-dbc3-4215-8773-1afabaa64c50.jpg"> All of these concepts are very applicable to real-life situations, but they are not taught consistently in schools. And that’s why Finny exists — to help working&nbsp;adults learn what they&nbsp;need to know about money so that they can&nbsp;make better-informed&nbsp;financial decisions and live prosperously!To inquire more about how Finny can help your organization as a financial education and wellness platform, please fill out and submit this short&nbsp;<a href="https://www.askfinny.com/workplace#get-started" target="_blank">contact form</a>.

When it comes to personal finance knowledge, the typical American gets barely a passing grade. Since January, more than 18,000 people have taken Finny Gauge, Finny's financial literacy quiz, which covers key financial topics ranging from compound interest and credit scores to the basics of the US taxation system.  The average Finny member scored 67%.

The Average American Gets a Passing Grade in Financial Literacy, Albeit a D

I've always felt like I was living the American dream. Never for a moment did I ever feel like I couldn’t reach the stars if I wanted to.&nbsp;Growing up in the quaint town of Angwin, up in the hills north of Napa in California, I was expected to be a good Korean girl at home, and a fun-loving American at school. My parents are immigrants from South Korea and instilled in my brother and me extreme discipline, which meant not only getting the best grades and winning piano competitions but also being disciplined with money. My mother was relentless about teaching me lessons about budgeting and saving. For example, I was told to avoid spending money on small things, because I wouldn’t then be able to afford the important things I need in life. The lessons were simple and practical, and I happily grew up thinking my upbringing in Angwin was the norm. That is until I grew up and faced reality. When I met my future husband, who immigrated from Serbia, I learned that when he came to the US on a scholarship for grad school, he had a total of $2,000 in his pocket. He thought he wouldn’t be able to make ends meet. Little did he know that he was much better off than most of his grad school classmates who were swimming in tens of thousands of dollars in student loan debt. I sure as hell was. Let’s face it, going through any life event — going to school, getting married, buying a home or car, expanding your family to retiring — comes with a hefty price tag. And unfortunately, just the thought of money gives the majority of us stress and anxiety. But why is that? Here are a few reasons to start:It’s cultural “Americans love to talk about how much they hate talking about money,”&nbsp;according to Joe Pinsker’s&nbsp;<a href="https://www.theatlantic.com/family/archive/2020/03/americans-dont-talk-about-money-taboo/607273/" target="_blank">article</a>&nbsp;on this very issue. We’re more comfortable talking about mental health, addiction, marital problems, race, and sex. My view is that we feel like our value as humans somehow becomes material or debased when you expose your pay or accounts. And actually, there are a ton of scientific and psychological reasons why we don’t talk about money (widening wealth gap, denial, guilt, moral hazards, and others), but whatever they are for each of us, that to me means that&nbsp;too many of us are trying to figure out how to manage our finances and learn about money on our own.And left to our own devices to learn about complicated topics isn’t easy. How many times have you searched online for financial answers, relied on the advice of friends and family, went with the first option available, or simply did nothing because it ends up being too complicated to figure out? Relying on others for financial direction at every turn in life is far from ideal.Choice overload is real <img src="https://finny.s3.amazonaws.com/images/8754834b-cc41-4f36-9563-8329f372a247.jpeg" style="width: 344px; height: 229px;">Which will you choose? Maybe one or none?When presented with too many options, we feel anxious and dissatisfied, and those feelings intensify when it comes to important life decisions. And in an increasingly complicated financial world with more and more products and services being offered every single day, it’s becoming harder for us to make decisions. For example, studies on 401(k) plan participation rates&nbsp;<a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.2006.00854.x" target="_blank">reported</a>&nbsp;in the Journal of Financial Services Research show that increasing the number of mutual funds offered in a 401(K) plan actually had a negative effect on participation.Personal finance concepts and&nbsp;the lingo that comes with it is hard to decodeWe don’t grow up learning about personal finance through a formal curriculum in school since the majority of states don’t mandate it. That means for most of us, understanding all the jargon that comes with personal finance and deciphering which money topics should be considered chapter 3 versus chapter 10 material in our lives is hard to piece together, let alone practically apply in our lives. For example, say you’re interested in short selling or trading options on your own (and there are now a bunch of companies offering free tools to help you do that). Before you jump into that, you should have a basic understanding of taxes, debt management, and savings, so that you’re making measured decisions that make good sense for you in your current stage in life. If you make the wrong trade, you may find yourself in a deep hole. And unfortunately, we’ve seen this play out over and over again..&nbsp; &nbsp; .&nbsp; &nbsp; .These reasons and more are leading to an increasing level of financial stress for too many hardworking people in the US, and the pandemic further highlights the need for solutions that focus on financial education.&nbsp;And it matters because our attitudes about money and personal finance play such a big part in our&nbsp;overall happiness. The stats speak for themselves:<ul><li>Younger adults report the highest levels of stress about personal finances than any other segment. 63% of Millennials report being financially stressed (USfinancialcapability.org).</li><li>60% of Americans are living paycheck-to-paycheck (Schwab). There are more payday loan stores than there are McDonald’s franchises in the US (NYTimes).</li><li>Financially stressed Americans pay $170 billion a year in bank fees alone (Financial Health Network). That’s about $1,500 in fees per US household.</li><li>Nearly half of Americans don’t have any emergency savings (USfinancialcapability.org).</li><li>US consumers owe a total of $14 trillion (NY Federal Reserve). That’s over $110,000 of debt per US household and that number is growing fast.</li></ul>Living paycheck-to-paycheck and having more debt that we can keep track of shouldn’t be the norm in our society, but it is.We need to find better ways to increase basic financial literacy so that more of us feel empowered to make informed, smarter decisions about money.&nbsp;And we need to start with the younger adult generations. If the younger adult generations are feeling so stressed, how are they to guide the future financial wellness of our even younger generations?.&nbsp; &nbsp; .&nbsp; &nbsp; .“An investment in knowledge pays the best interest.”&nbsp;—&nbsp;Benjamin FranklinFor me, I’ve learned not to take what I was taught by my mother for granted. My upbringing wasn’t the norm, and I’m lucky for that. All of those childhood lessons on personal finance have had a lasting impact on how I budget, save, pay down debt, invest, and live my life.Many fintech companies all around the world have launched noble missions, democratized access to personal finance tools, but have overlooked the big elephant in the room: the need for and focus on basic financial education.&nbsp;If you’d like to learn more about how to incorporate Finny into your workplace, <a href="https://www.askfinny.com/workplace#get-started" target="_blank">get in touch with us</a>. We'd love to work with you on a customized plan for your people.

A reflection on the dire state of our personal finances and why we constantly overlook financial education.

Why Financial Education Fails Today

Four Financial Wellness Solution Types for the Workplace

The Average American Gets a Passing Grade in Financial Literacy, Albeit a D

Let’s Stop Overlooking the Elephant in the Room: Financial Education