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Younger generations’ financial literacy lacking: MoneyLion study

Results from MoneyLion’s first Personal Financial Wellness Study confirm the growing influence of digital sources in our financial lives, but the steep drop-off of knowledge among millennials and Gen Z consumers.

The results were gleaned from a survey of 4,010 American adults.

Cynthia Kleinbaum Milner headshot
Cynthia Kleinbaum Milner

Many Americans, especially younger ones, have little familiarity with financial products and terms, MoneyLion chief customer officer Cynthia Kleinbaum said. 

  • 48% of millennials and 30% of Generation Z are familiar with products like checking accounts and mortgages;
  • 36% of millennials and 30% of Generation Z are familiar with services like credit unions and stock brokerages;
  • 28% of millennials and 25% of Generation Z are familiar with concepts like capital gains and compounding interest.

Given these numbers, it’s little surprise that only 29% actively follow a plan to build future wealth, and only 20% feel they have the necessary financial skills. Fewer than half felt they have someone they trust to turn to about financial matters.

The growing role digital sources play in education

More and more look to digital sources for that knowledge. Half of Generation Z (49%) use social media as their primary financial education source. This includes learning from influencers. Add in millennials, and that number rises to 75%.

But there is an education gap. Only 25% of Americans had recently received financial management information. Such advice is welcome, as two-thirds said they acted on the information they did receive.

Fintech providers should note that half of all respondents are comfortable taking action through apps. There is a desire for knowledge and an ability to act quickly if they like what they hear.

Add it together, and many of us are left wanting more from financial service providers. Less than one in four fell well-served in access, and only 53% agreed with the statement that “I trust my bank has my best interest in mind.” 

Financial institutions are in a tough spot because we live fragmented financial lives, Kleinbaum said. That’s why MoneyLion connects people with the most suitable auto insurance, mortgages, and accounts from various sources.

“We don’t expect customers to get every financial service fulfilled by one institution,” she said. “The only way to provide (the best products in multiple spaces) is to provide choice.”

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Educate a hungry marketplace through the digital channels most already access many times each day, Kleinbaum added. With many prepared to act quickly, connecting content with products is imperative to reduce the distance between learning and action.

MoneyLion’s digital education strategy

MoneyLion’s strategy includes short-form videos and MoneyLion University, which delivers financial education and skill development to customers. They partnered with NFL player and University of Pennsylvania lecturer Brandon Copeland. Copeland provides money tips, advice, and lifestyle hacks in a digitally conducive format. 

Given the high rates of people who would benefit from essential advice, it’s good to use media specializing in short, easily digestible content.

“We’re providing them something that adapts to how they already behave,” Kleinbaum said. “They’re already on their phone all the time. They’re already looking for financial advice in a fun, engaging 60-second video. We didn’t create that; they already were doing it. We are just riding the wave, ensuring the content is curated, and our customers are taken care of.”

For a clue where this is headed, look to the early days of TikTok and Instagram, when consumers would see someone promoting an item and want to order it immediately, Kleinbaum said. Extend that to digital finance; if someone likes the strengths of a credit card or bank account, why can’t they apply then and there?

“That’s when everything clicked to me,” Kleinbaum said. “We have the bank the banking information of our customers, we know their financial situation, and if we can provide them with the content that is right for them, and then make that transaction, one-click transaction so they can take action. 

“It’s the best of the social media world and the bank. That’s why we wanted to do this research to confirm that what we were building was taking… on where people are learning, where people are consuming financial education, (and determining) how ready they are to take action.”

Why fintechs have the digital education advantage

While most institutions have an app nowadays, traditional institutions aren’t incentivized to serve everyone with a personalized approach, Kleinbaum said. They prioritize the smallest populations with the most significant incomes.

Contrast that with fintechs that start from the point of personalization, Kleinbaum said. That perfectly dovetails with the digital era, where people can check their financial data whenever they look at their phone instead of transacting at a bank.

“I think the traditional banks don’t want to be that daily destination for the audience’s (and) I don’t know that they are set up organizationally, that they have the right incentives to do it that way,” Kleinbaum said. “And that opened the door for other companies like MoneyLion.”

Beginning with the onboarding process, MoneyLion asks detailed questions to determine a customer’s financial priorities. Their answers determine the content they’ll see. Combining that with bank account data and MoneyLion can link customers to suitable financial product providers when they are ready to take those steps.

“We know that the newer generations are willing to put in the time to learn how to manage their finances; we know… they’re not going to sit and read a blog post,” Kleinbaum concluded. “So we create content in a way that they’re going to consume it, they’re going to learn, they’re going to have better financial outcomes. 

“Then all of us in the U.S. will have a better future. We have a financial literacy crisis. So many nonprofits, government institutions, and private organizations are trying to solve it, and we are going in the wrong direction. Every generation is less financially savvy and less prepared for the future. I hope every one of our competitors reads our research and helps us in this financial literacy crisis in their way.

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