At Marstone, promoting financial literacy is among our most deeply held core values. You may not realize it, but financial literacy — or a lack thereof — is a major crisis currently facing America. It’s something that cuts across all income levels and demographics. It applies to Gen Z, who often don’t understand all the ins and outs of financial planning, to Boomers, who have underestimated how much they’ll need for retirement, and to everyone in between.
The United States’ adult financial literacy rate stands at 57%, ranking it toward the bottom of developed countries and, some observers say, “woefully short” of where it should be. In a recent poll of 18-to-24-year olds that asked what high school course they weren’t offered but they could have most benefited from, “money management” topped the list. And two-thirds of American adults can’t pass a basic financial literacy test.
These stats represent just a snapshot of the sobering reality that many Americans are in dire need of financial education. Financial literacy is a huge reason that Marstone exists. Our founder, Margaret J. Hartigan, came to discover in her past life as an advisor with Merrill Lynch that most people have anxiety about money — and much of that anxiety stems from a lack of financial literacy.
Margaret realized that many people would prefer the anonymous experience of interacting with a digital advisor over talking with a human being. In a digital setting, people are more willing to reveal things that they are uncomfortable discussing with a human being — especially their lack of financial knowledge. A digital setting also means that people can learn at their own pace, and this insight could hold the key to improving financial literacy.
The possibility for new learning alternatives played a key role in creating Marstone’s single biggest differentiator: our user interface. We’ve carefully designed our software to put people at ease, alleviating the anxiety that financial conversations can provoke, and to provide multiple opportunities for self-directed learning.
A well-designed interface can enable multiple types of learning. Take our investment portfolio page, which we created to satisfy both “left brained” and “right brained” people: its interactive, graphical presentation of investment holdings allows visual thinkers to explore how their money is invested and learn through a touch of gamification and play. The extensive accompanying text, meanwhile, allows those more verbally inclined to read in depth explanations about the composition of their portfolio.
The Importance of Starting Young
While we think bringing financial education to Americans is important no matter where they are in their lives, it’s obvious that there is a sorely felt need for more of this during the high school and college years. As the poll cited earlier makes clear, too many students are graduating without a solid base of knowledge in personal finance.
In focusing on younger people, there’s much untapped potential in forging private-public partnerships, wherein fintech products can be used as in-classroom tools for teaching financial concepts. For instance, financial planning software and retirement calculators can be used to teach budgeting and the importance of savings.
Digital tools, in general, are increasingly commonplace in classrooms: tablets are replacing spiral notebooks, and lessons are now presented in a digital, interactive manner rather than via an overhead projector. “Home economics” classes once taught students how to balance checkbooks; with more people banking online than using checkbooks today, it makes sense that digital tools would now be used to illuminate the basics of financial literacy to up and coming generations.
What’s clear is that financial literacy is sorely lacking among most Americans. It’s crisis that we as a nation should be taking more seriously and dedicating more resources to solve. That’s why at Marstone we are trying to do our small part to promote financial education among all demographics. Indeed, we believe it is one of the keys to creating a strong economy as well as a more equitable society.