Educating consumers about financial literacy is rarely a one-time action. It requires regular and continuous engagement.
By Kelsey Havemann
Financial literacy: We’ve all heard of it and know it’s important. But what does it mean?
It is the ability to understand and effectively utilize financial skills, including personal financial management, budgeting, saving, and investing.
Today’s challenge is that society’s understanding of basic finance is waning. According to the 2023 TIAA Institute’s GFLEC Personal Finance Index, an annual survey that assesses personal finance knowledge, U.S. adults, on average, correctly answered only 48 percent of the questions in 2022. This is the lowest score since its inception in 2017.
While the survey reveals that financial literacy is low across all generations, it’s especially concerning among Gen Z. On average, they answered only 38 percent of the questions correctly. What’s more, when examining results by race and ethnicity, Black (34 percent) and Hispanic (38 percent) scores were considerably lower than their white (53 percent) and Asian (55 percent) counterparts.
This is a wake-up call for America. An inadequate understanding of functional financial knowledge can have disastrous effects on the financial health of our communities. As TIAA notes, individuals with low financial literacy are six times more likely to have trouble making ends meet and four times more likely to spend more than 10 hours a week stressing about personal finances, all of which affects their relationships, work, and ability to carry out everyday tasks.
So, what can we do? Here are six strategies that banks can apply in their communities:
1. Get back into the schools. The pandemic is officially over, and schools are back to normal schedules. Educators are scrambling to re-engage students in the learning process, and guest speakers are often welcome. Contact teachers directly rather than principals. Tap into a teacher you know through your own kids, your neighbors, your relatives’ kids — or attend a school event and meet teachers. Ask if you can help by coming in and teaching a financial literacy lesson.
2. Register for the ABA Foundation’s programs to access turnkey resources. There are numerous lesson plans, across all grades, that are free for any bank to use. Teach Children to Save focuses on grades K-8, while Get Smart About Credit is for teens and young adults. (Visit aba.com/FinEd to sign up.)
3. Utilize social media. Post about financial education topics and share tips and resources that educate and empower your customers. Simple reminders like, “Improve your credit score through on-time bill payments,” or “Pay yourself first and watch your savings grow,” are powerful messages to post online. You can also create social media reels about getting a loan or opening a bank account. Check out the Foundation’s toolkits for messaging templates on LinkedIn, Twitter, Facebook, and Instagram.
4. Use your bank’s existing resources. If you have public monitors in your bank, use them to display messages, videos, or short “functional lessons.” You can also encourage your customers to reach out for financial literacy counseling or host sessions at your bank.
5. Connect with community centers. Many community-based organizations are looking for ways to engage people. Reach out and talk about what you have to offer, but do not share a sales pitch about the bank. As you cultivate these relationships, focus on educating consumers first and you will develop valuable community goodwill.
6. Be prepared, be relevant and be sure to listen. No matter what direction you take. If you connect with a teacher or neighborhood organization, start by listening, but have a specific example in mind and then adjust your strategy based on their needs and interests. Be aware of your community’s cultural sensitivities when posting information online or in bank branches. The goal is to be purposeful and supportive, but not patronizing.
Remember, educating consumers about financial literacy is rarely a one-time action. It requires regular and continuous engagement.
Kelsey Havemann is senior manager for youth financial education at the ABA Foundation.