Do you consider yourself to be financially literate? What about your customers? Do you think you can help them with financial education? The thing is just one-third of grown-ups understand fundamental financial concepts. Just imagine — only about 57% of Americans are financially literate, and this number is one of the highest in the whole world. The majority of the countries show a very low rate — 0-34%.
That’s why the interest in financial literacy is rising today. More and more people want to learn how to manage their money intelligently as this can make lives more comfortable, safe, and prosperous. And here comes the market gap for you to fill in through the development of modern fintech apps. But before satisfying your users' need in acquiring the finance management skill, let’s find out a financial literacy definition first.
If put simply, financial literacy is a set of different financial skills that a person can successfully use. These skills may vary, but usually they include earning, saving, investing, budgeting, borrowing, protecting, and taxation. The lack of knowledge in finance typically results in a mixture of negative consequences, barriers, and poor spending decisions.
Why should financial institutions start the fight against illiteracy? And why should you, as a business owner, make efforts towards financial enlightenment? All because illiteracy is a crucial obstacle to financial inclusion. You lose potential clients because they have no clue about the products and services the financial market offers today. So, keep reading to find out what can be done and how fintech apps can help boost your customers' financial intelligence!
Why Is Financial Literacy Important to Society?
People’s lives are multifaceted, and in many ways, are centred around money. Loans, down payments, health insurances, assets for investments, buying a car, retirement planning, and paying out debts are just a part of all those situations where knowledge in finance comes in useful.
That’s why achieving financial and digital literacy is important in today’s society — it makes a living more comfortable and less stressful. Let’s have a look at the key benefits this skill opens to you:
- It allows choosing what’s better for you. When you know little about money management, you let others make significant decisions instead of you. It means your financial interests aren’t always respected.
- It protects you. The financial industry is growing, and the services offered today are endless. With it all, the level of fraud is increasing too. For illustration, the annual value of online banking fraud losses was almost £160m in 2020 in Great Britain. Thus, the more you’re financially savvy, the fewer chances to fall for scammers.
- It helps achieve your goals faster. The one thing is to know what you want. Another is to know how to get that.
- It reduces monthly expenses. Do you live paycheck to paycheck? Is there a feeling at the end of every month like you just don’t understand where all your money has gone? Then it’s time to make changes in the way you earn and spend.
When it comes to financial literacy and its society effects, the following should be outlined:
- It lowers divorce rates. Spouses that argue about money at least once a week are 30% more likely to get divorced.
- Financial matters within a family don’t become a social issue. All because it decreases the pressure on the outside support systems.
- It reduces crime. When financial needs are satisfied, people are much less likely to break the law.
Where and how to start the bridge-building between you and your finances? Let’s learn what financial literacy consists of.
5 Main Components of Financial Literacy
Usually, 5 key components of financial literacy are distinguished. This is what you need to build a strong financial literacy foundation:
1. Earning. This is the major step to undertake — you need to understand how much you earn. What to keep in mind here? Of course, your gross and net income. Consider all the deductions like employer-sponsored health insurance, a retirement plan, and taxes. By the way, some countries like Sweden, Netherlands, and Japan have high taxes (50-57%) while others like Saudi Arabia don’t have them at all. Once you know your net monthly income — you’re good to spend, save, and invest.
2. Spending. Creating your personal budget is what important here. It allows controlling your spendings and moving toward your financial goals. So, after you calculate your income, you need to make a list of your monthly expenses — mortgage payments or rent, groceries, eating out, insurance, and whatnot.
3. Saving. This, first of all, implies putting away for an emergency. Experts normally advise having 3-6 months’ worth of living expenses. Money for retirement should be your another financial goal, and the earlier you start, the better. Consider 401(k) and IRA for that purpose. Finally, saving for a big purchase. A helpful tool that the majority of modern banks and fintechs offer is automatic money transfer to your savings account.
4. Borrowing. Borrowing isn’t something necessarily bad if you know how to intelligently handle it. For that, you need to learn how the credit system functions, what the loan structure is, what the interest rates are, and lots of other related topics.
5. Investing. This is, probably, the most difficult component of financial literacy. Not so many people want to drive in deeper and learn all about indexes, diversification, risk mitigation, and many more. But this is what can help to increase your income and get benefits.
In general, information on investing, borrowing, and all other components is broadly accessible today. For one, fintech platforms and apps are great tools for self-education in terms of money management. But business owners should pay even more attention to how to spread this knowledge more effectively. Dive deeper into the best apps examples that are already in the market and shape your unique idea after!
5 Best Financial Literacy Apps and Biggest Trends in the Fintech Industry
The Global FinTech Market was valued at $7.3trln in 2020, and this number continues to increase. With fintech market growth comes an increase in its interest. That’s why consumers want to know more about investing, funds, credits, loans, etc. To meet the demand, fintechs have to come up with a variety of means to educate their users. As mobile applications serve great for that purpose, DashDevs have prepared a review of the best financial literacy products. Draw inspiration to stay competitive, attract customers, and increase sales!
This is probably one of the best apps to learn about personal finance. It was founded back in 2005 in New York as a non-profit organisation whose mission was to educate youth in terms of finance. Now the app is used by people all around the world helping to lead financially responsible and philanthropic lives.
Unlike lots of other applications, World of Money has lessons for many age groups (7-26 years old). Here are the features you can find there:
- video lessons on a variety of topics (budgeting, taxes, paying for college, investing, etc.);
The app is so popular and has such a high rating (5.0) on the App Store because the lessons are quite short (up to 5 min) but well-structured and informative. Moreover, it’s completely free.
The app has become the best friend for lots of modern parents who want to teach their kids money management. What are its advantages?
- It builds good financial habits by providing educational content (articles, activities, worksheets).
- There are 2 accounts — for parents and kids.
- You can manage your children’s allowances.
The app is designed for 4-17-year-olds. RoosterMoney believes it’s never too early to start learning how to deal with money. And this is reasoned as according to the research money habits are set by age of 7. Kids start with a star chart, move towards a virtual pocket money tracker, and then eventually to their own prepaid debit card. Isn’t that what all fintech should implement? What do you think?
If you want to learn more about investing, trading, and stocking, Investmate is just for you. It offers:
- various learning materials;
- over 30 courses with short lessons (up to 3 min);
- useful trading tips and videos;
- trend predictors and market simulator;
- financial quizzes.
In general, no matter how old you are and what you already know about investing, the app has lots of personalised services. You can start with an introduction to finance if you’re a complete newbie. Or become a CFD expert in case you already have some skills and experience. The app has become a guide in the world of investments for thousands of people today.
Mint is recognised as one of the best budgeting apps of 2021. It’s created for those who look for a tool to help them meet budgeting needs. It’s completely free and allows doing the following:
- tracking spending and savings;
- setting and tracking budget goals;
- connecting all of your financial accounts;
- tracking all of your monthly bills.
One of the app’s strengths is its security. The users' personal and financial information is effectively protected. But the best thing about it is that you can access all your financial life in just one app — this is mainly why Mint is so popular.
An extremely helpful app for everyone who can’t get control of their money. The app’s main mission is to simplify how you manage and pay your monthly bills. As its owners claim, Prism is magic for your bills. Here are a few splendid features you’ll enjoy:
- it syncs all your account balances and bills;
- it gives the whole picture of your finances;
- it sends you reminders;
- it allows paying your bills right from the app.
The app is user-friendly, free, fast, and simple. Moreover, it’s flexible as a user can choose how they want to pay their bills: with credit, debit, prepaid, or a bank account. Tips and other helpful content will certainly raise the level of financial literacy as well.
These are the main finance literacy tactics within modern fintech app development. Simplicity, accessibility, and affordability are main fintech trends today. Companies are striving to educate the consumers, and, in such a way, attract them to their services. But what’s awaiting in the future? What should you, as a business owner, be ready for? Keep reading to learn a few prospects from DashDevs!
Financial Industry Prospects for Businesses
The future of the financial industry is shaped by the development of technology and the importance of sustainability. It’s also forecasted that the banking sector is going to be greatly affected by the rise of technosocialism. What are the other mobile banking future trends to keep in mind not to be left out in the cold and stay competitive? Here’s what fintechs can implement in their apps to reduce the level of financial illiteracy among their clients:
1. Video education. Modern learners are no longer interested in articles, textbooks, courses, and worksheets. Engage your users by providing them with interesting, informative, but short videos and your app is doomed to succeed.
2. Social media. Modern generation spends tons of time on social media today. Use it as a powerful tool to influence the financial behaviour of your customers. How? You can cooperate with influencers or create viral content to transfer knowledge of finance to the masses.
3. Webinars. While video education and social media are great for visual learners, webinars are amazing for kinesthetic learners. Choose among different engaging activities, such as polls and surveys. By the way, many experts see webinars as the future of financial literacy education, so keep that in mind.
What Are the Tips for Improving Users' Finance Literacy?
What should a business remember about when developing a fintech app if its aim is to give personal finance tips and tricks and to raise the level of clients' financial literacy? First, make sure it’s completely secure. Second, engage users digitally as much as possible. Third, remember that artificial intelligence is gathering pace so try to implement it where you can. Finally, if you’re planning to develop such an app and need a strong team of professionals to help you with that, contact DashDevs! Our experts are there for you to create a project of any complexity from scratch!