Despite living in a place and time where financial literacy matters more than ever, in many respects, individuals, and businesses are fumbling through the dark and can’t answer the question of “How can technology promote financial literacy?”. This paradox highlights the obvious necessity that our technology-rich era had to eliminate.
However, the profound need for robust financial literacy has intensified for everyone, from individuals to massive corporations, due to the widespread effects of the recent pandemic. This article explores the intersection of technology and financial literacy. We will answer what is financial literacy and financial technology and will learn about their work in a detailed way.
What Is Financial Literacy?
Financial literacy is the ability to grasp and apply the proper management of personal finances through informed decision-making. These skills cover many areas of financial activity — from creating budgets to choosing investments to even understanding the various options for borrowing — and the breakdown of the complexities that represent tax planning and compliance. Though this component is essential to the long-term financial well-being of individuals, approximately 66% of Americans struggle with at least one aspect of financial literacy.
This is significant because financial literacy ultimately serves as the catalyst that provides individuals with the confidence to square off against financial decisions head-on, thus negating its potential to cultivate those feelings of monetary stress and hardship.
In practical terms, financial literacy is essential to everyday activities such as investing choices, wise use of credit cards, managing mortgages, and even paying off student loans. It is the foundational knowledge that allows individuals to stay on the stable and prosperous side of their financial ledger.
The lack of financial education often results in taking out high-interest loans to manage people’s unexpected expenses and major purchases. Remember the importance of choosing reliable financial institutions even if you need extra resources. A great example of such a website is 15M Finance, a lending company providing extra cash for individuals regardless of their credit rating. Unlike other loan companies, the platforms offer reasonable interest rates and help you repay your debt without unaffordable extra expenses.
What Is Financial Technology?
Financial technology, or FinTech for short, is the 21st-century nexus of financial services and technology. It refers to the union of technology and financial services. Promising innovative ways of using technology to design and deliver financial products, financial technology covers a broad spectrum of applications.
From mobile banking apps and online investment services to peer-to-peer (P2P) lending, cryptocurrencies, and blockchain, the technologies that are revolutionizing the financial industry and giving people alternatives to traditional methods of financing are all examples of financial technology.
Promising to change the way we live as much as the way we do business, FinTech has revolutionized how we handle financial transactions, manage our investments, and access such retail banking services as a deposit and a loan.
Financial Literacy Education Options and Their Role for Students
Financial education is essential for students as they can learn how to comprehend and manage money, enabling them to pursue academic, personal, and future financial opportunities. Many, however, struggle with financial planning and decision-making due to a lack of expertise and confidence in the area. Technology plays a critical role in addressing these challenges by providing convenient and joyful financial literacy education with tools designed around student life and learning needs.
Key financial literacy-enhancing technologies include:
Online Courses and Modules
Online platforms offer modules on budgeting, saving, investing, credit management, taxes, and loans. The interactive, self-paced learning environments also give quizzes and certifications as evidence of one’s learning progress.
Apps and Games
Students practice financial concepts by simulating their emergence in true-life scenarios that use app features to provide practical enjoyment and engaging and mind-expanding life outcomes. Such technology delivers immediate feedback and rewards for practicing basic principles like budgeting, expense management, and investment strategies.
Virtual Assistance via Chatbots and Virtual Assistants
Artificial Intelligence (AI) and machine learning give students advice and specific support for their financial questions and informational needs as they explore a choice of scholarships, college and work opportunities, different loans, and their retirement.
Videos and Podcasts
Students may also use the technology as a study aid in their future academic and job situations. The integrated podcast and video platforms have storytellers and experts sharing their insights on the latest financial trends and strategies. Their narratives, tales, and practical experiences are concocted with game features and told by successful figures who offer emotional tips for overcoming hurdles and achieving one’s dreams.
Internet Platforms
Online communities and platforms, including social media, forums, and blogs, create new spaces for learning and collaboration by providing volunteers for tutoring, mentors for cheering, peers for airing confusing concerns, and leaders for directing financial education.
By using advanced technology, students can enjoy customized, enjoyable learning experiences that would meet their needs and assist them in overcoming all barriers to successful financial literacy education and financial wellness.
How Does New Financial Technology Impact Financial Behavior?
In recent times, as a natural way of financial industry evolution, financial institutions have continued to become more entwined with technology, a development that has significantly shaped spending behavior. People’s money management habits are affected considerably by the FinTech industry. The most visible examples of that impact are the following:
Inclusion in Mainstream Finance
A core benefit of the fusion of finance and technology is the integration of unbanked and underbanked individuals into the nation’s financial system. Advanced technology platforms in finances have empowered institutions to refine their services and distribute critical financial information with great tact.
HR Services Evolve
As employees prioritize job benefits and quality of life more than ever, Human Resource departments are evolving to offer expanded support.
HR isn’t just about retirement plans anymore. Many departments are including services like employee assistance programs, mental health resources, and financial literacy education. This is an area where technology is particularly useful, as HR departments turn to technology to meet the needs of remote workers.
Technology is heavily used as HR departments search for ways to support people in trying times. Apps and online services for boosting financial literacy have popped up everywhere, not only helping employees plan and manage their finances for the future but also relieving stress and helping them adapt to their work environment.
Supporting employees with tech that enhances financial literacy is something nearly 100% of employees want, and it’s not just the young ones. They have plenty of stress, so any way to relieve that is more than welcome in the workplace.
The Ease of Spending
The speed with which spending money has evolved over time is found to be quite remarkable. In the past, making a purchase was a practice in cognition – counting out cash, writing a check, and so on – and thus included a brief reflection on the purchase. Presently, with contactless payments, buy now, pay later schemes, stored payment data, and the like, it is a nearly instantaneous process, and one unaccompanied by a pause, demanding a static development of solid financial habits to avoid the impulse to spend.
Optimizing the Use of Financial Data
Businesses should use collected financial data effectively to realize the benefits. Such data can help companies analyze the current and future state of their finances. Income tracking is also important. By finding out where profits are coming from and understanding the return on investment, businesses can see their most lucrative areas.
Integrating purchasing data with accounts payable information gives businesses a holistic view of cash flow, enabling them to ensure they process invoices on time and can take advantage of all payment terms.
Effective risk management is another key application. The data available can be used to forecast and plan financially. This reduces potential risks and allows businesses to plan in a more detailed and effective way.
In times of economic uncertainty, the leveraging of this existing financial data is vital if any business is looking to secure its financial future. Implementing collected financial data into growth strategies and planning is essential for monitoring the financial set of benchmarks.
Increased Complexity in Financial Management
While there is no doubt that technology can help a person successfully manage his or her various financial engagements through a series of electronic literal financial meetings, the large number of platforms that have been opened up is highly confusing for the standard-issue person. As a result, people face difficulties with managing their financial data and need time to study various aspects of FinTech.
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