Course Correcting: How Organizations Can Combat Financial Literacy Misinformation

At one time or another, we’ve all come across a financial decision that we weren’t entirely sure how to proceed with – perhaps it was opening a bank account, applying for a student loan, leasing a car or buying a house. Some of us rely on family and friends to guide us through the process, but in today’s growing digital environment, many consumers are doing their own research online, reading customer reviews or listening to social media influencers.

According to a 2018 Pew Research Center survey, 81% of respondents mostly rely on their own research to make major 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 mainstream financial system, it’s important to recognize some of the information can be misguided or misinformed, albeit unintentionally. Most people sharing information mean well; however, their perspective is usually based on prior experience or unique circumstance with conclusions drawn from incorrect assumptions or inaccurate explanations of what happened from other self-professed “experts.” The most important lesson in these situations is that it is critical for consumers to confirm the reliability of a source.

The credit and financial systems are very complex even when you work in the field. Imagine how frustrating it can be if you don’t know where to begin – conflicting sources, incorrect information and amazing but empty (and sometimes illegal) claims only compound 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 help them recognize misinformation. It starts with engaging consumers with impactful financial literacy programs at the right moment when consumers are most open to receiving it.

Collaborate to Build Trust

It’s human nature to seek advice or information from people you trust. Today, many view social media influencers, online resources, and family and friends as more trustworthy than organizations within the financial services industry, particularly consumers from underserved communities. Quite frankly, there’s an inherent lack of trust in our industry. Far too many people have been overlooked by our financial system. That’s a trend we need to reverse.

Before you can build trust, you first have to earn it. The first step in earning trust is engaging with people and listening to and learning from them about their needs. Too often we convince ourselves that we can march into a community, tell people what they should know and then leave. Job done. But it doesn’t work that way. In order to be successful, to earn the trust of those who live there, we must become part of the community. Partnering with organizations within the community that understand the day-to-day struggles that many consumers experience is key. Non-profit service organizations, the faith-based community and local financial service organizations such as credit unions, including Community Development Financial Institutions, can help act as a bridge to engaging people and sharing financial concepts that are most important to them.

Collaboration also extends beyond working with local community organizations. As an industry, we have to recognize that each of us holds a different piece of the puzzle. Financial inclusion is never a single-point problem. Overcoming the barriers to financial inclusion requires a multi-faceted approach within a community. Financial literacy can only lead to financial capability and success if we are simultaneously working to provide access to financial services coupled with job skills training, small business development, affordable health care services, low-cost housing and myriad other issues. The more we work together to build 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 also have to reach them at the right time. That means continuing to require and implement financial literacy programs in our schools. Understanding core financial concepts at a young age will help establish a foundation for our youth 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 a need. Those moments when people face financial decisions they are uncertain about – except that their future depends on making the right choices – are the teachable moments when adults are most receptive to receiving information. That’s when we need to engage them. One-off credit classes covering broad financial topics are helpful, but not as impactful as addressing a key learning moment on a specific topic at a critical moment. The more we relate to people on a human level and provide education that enables them to address a personal need, the better prepared they will be to handle every financial decision they come across.

While much of the misinformation around financial literacy is unintentional, as an industry we have an obligation to correct misstatements and guide consumers through the financial system. A more inclusive credit economy is the goal, and financial literacy is a critical component of attaining that goal.

Rod Griffin is Senior Director of Consumer Education and Advocacy for Experian.