Lesson Correction: How Organizations Can Combat Financial Literacy Misinformation

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At one time or another, we’ve all made a financial decision that we weren’t sure how to make – maybe it was opening a bank account, applying for a student loan, renting a car, or to buy a house. Some of us rely on family and friends to guide us through the process, but in today’s increasingly digital environment, many consumers do their own research online, read customer reviews or listen to social media influencers.

According to a 2018 Pew Research Center survey, 81% of respondents rely primarily on their own research to make important life decisions. This includes browsing the Internet, reading online forums and social media posts, or listening to podcasts.

While we encourage consumers to proactively engage and seek information about the credit economy and the traditional financial system, it is important to recognize that some information may be wrong or misinformed, albeit unintentionally. Most people who share information have good intentions; however, their perspective is usually based on past experience or unique circumstances with conclusions drawn from incorrect assumptions or inaccurate explanations of what happened from other self-proclaimed “experts”. The most important lesson in these situations is that it is essential that consumers confirm the reliability of a source.

Credit and financial systems are very complex even when you are working in the field. Imagine how frustrating it can be if you don’t know where to start – conflicting sources, incorrect information, and startling but empty (and sometimes illegal) claims only add to the frustration. As an industry, we have a responsibility to help consumers, from students to retirees, understand how to successfully navigate the financial system and recognize misinformation. It starts with engaging consumers with impactful financial literacy programs at the right time, when consumers are most willing to receive them.

Collaborate to build trust

It is human nature to seek advice or information from people you trust. Today, many consider social media influencers, online resources, family and friends to be more trustworthy than organizations in the financial services industry, especially consumers in underserved communities. Quite frankly, there is an inherent lack of trust in our industry. Far too many people have been neglected by our financial system. This is a trend that we must reverse.

Before you can build trust, you must first earn it. The first step to gaining trust is to engage with people, listen to them and learn from them what their needs are. Too often we convince ourselves that we can walk into a community, tell people what they need to know, and then leave. Work done. But it doesn’t work like that. To succeed, to gain the trust of those who live there, we must be part of the community. It is essential to partner with organizations within the community that understand the day-to-day struggles that many consumers face. Nonprofit service organizations, the faith community, and local financial service organizations such as credit unions, including community development financial institutions, can help serve as a bridge to engage people and share financial concepts which are most important to them.

Collaboration also extends beyond working with local community organizations. As an industry, we must recognize that each of us holds a different piece of the puzzle. Financial inclusion is never a one-time problem. Overcoming barriers to financial inclusion requires a multifaceted approach within a community. Financial literacy can only lead to financial capability and success if we simultaneously work to provide access to financial services coupled with skills training, small business development, affordable health care services, low cost and a myriad of other problems. The more we work together to create comprehensive financial literacy programs in conjunction with other community development initiatives, the more effective and beneficial they will be. Financial literacy is the foundation for financial success – it’s just the beginning. It cannot succeed in isolation.

Meet consumers where they want to be met

Building trust with consumers is only the first phase of the battle; we must also reach them at the right time. This means continuing to demand and implement financial literacy programs in our schools. Understanding basic financial concepts at a young age will help establish a foundation for our young people to navigate the financial system as they become adults.

Financial literacy is a lifelong journey. While financial literacy programs in schools have a built-in audience, most adults are only interested in learning when they feel the need. Those times when people are faced with financial decisions they are uncertain about — except that their future depends on making the right choices — are the teachable times when adults are most receptive to receiving information. This is when we need to involve them. One-time credit courses covering broad financial topics are helpful, but not as impactful as addressing a key learning moment on a specific topic at a critical time. The more we relate to people humanly and provide them with an education that enables them to meet a personal need, the better prepared they will be to handle every financial decision they encounter.

While much misinformation about financial literacy is unintentional, as an industry we have an obligation to correct inaccuracies and guide consumers through the financial system. The goal is a more inclusive credit economy, and financial literacy is an essential part of achieving that goal.

Rod Griffin Rod Griffin

Rod Griffin is senior director of consumer education and advocacy for Experian.

Sarah J. Greer