How to help Americans become smarter about money

With April being Financial Literacy Month, the focus of this week’s podcast is education.

Rod Griffin, who leads consumer education and advocacy at Experian, joins us to talk about what Americans need to know financially, and how banks can help them learn.

A few takeaways from the conversation:

  • Rod’s view is that, as a nation, we’re lagging when it comes to adult financial literacy and it’s important to raise that knowledge level.
  • Different people learn in different ways, so banks and credit unions should offer their financial literacy content in a variety of formats and distribution channels.
  • Partnerships in underbanked communities can help banks learn what to emphasize in their financial literacy programs and can also help build trust.

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Below is a full transcript of my interview with Rod Griffin.

Rod, it’s April, and April means that it’s Financial Literacy Month in the U.S. How would you assess the level of financial knowledge among adults in the country at this point?

Optimistically, a D, maybe. Not doing really well. We’re in a very complex financial marketplace in the world right now. When we look at what’s happening out there in terms of savings rates, in terms of credit knowledge, in terms of what borrowing means, in terms of even things like insurance, it’s not as strong as it needs to be.

What do you think accounts for that? This relatively low level of financial literacy in the country, particularly given that this is an issue that we’ve been hearing about for a long time. You’ve personally been in this space since the mid-90s, so what kind of progress have you observed in the past quarter-century or so, and what do we need to keep going on the progress side?

It’s a slow, long slog, but it’s making progress. We’re seeing things change in the school systems. We’re seeing things change in the political world. I happened to be in Florida visiting my daughter and just saw the news, not too long ago that they’re now requiring financial education into the schools now. We’re seeing that in more States. Our kids will be more exposed, but from an adult perspective, it’s always been a challenge. Finance isn’t always the most exciting topic in the world, but it is one of the most important. People have always struggled a bit because life happens and they have so many other things on their plate.

What would you say are the most important elements that folks needed to know if we were to give somebody a crash course in financial literacy? What’s that knowledge that would benefit by knowing first?

Start with saving. I think that’s the first and foremost fundamental concept. Budgeting, of course. If you don’t like the term “budget,” call it a savings plan. I don’t really care what you want to call it, but you have to take control of your money so it doesn’t control you. Then look at credit because we all carry credit cards and that plastic in our wallet, and we need to borrow for things like buying a home or getting a car. It’s a ubiquitous part of our life. So understanding credit reporting and scoring because it’s so ubiquitous—it’s not just about credit anymore. It can affect your ability to rent an apartment, to get insurance, to get a job in some cases. Not your credit score, but your credit report and your credit history. So those are keys, and then talk about retirement savings in the long-term financial goals kind of round out the topics for me.

A few years ago, Rod, you were honored as Educator of the Year by the Institute for Financial Literacy, which is a global organization. If I had the power to put you in charge of the country’s financial literacy strategy, how would you change the way people learn about their finances and how to manage those finances so that they locked in that necessary knowledge? Where would you start topic-wise, and when would you start age-wise?

It was a great honor and a great organization. I think we start early and we start in school. We have school for a reason. We teach Math, English and things like trigonometry for a reason. We don’t always use that but with personal finance, the sooner you learn basic concepts, the more effective you’re going to be as an adult. I think starting young, teaching basic concepts around saving and investing and budgeting so that when you become an adult, if you don’t have the answers right off the top of your head that you need to ask for them and know where to turn to get those answers. I think that will be the most empowering thing. That’s where I would start. Then it’s a lifelong learning process. For adults, it’s about pain points generally. When you have a problem, you’re willing and open to learning. If you don’t, you may not be. Being there, as Experian, as our company, or as a lender, when a person reaches one of those life events or life moments, it creates a pain point where they need to know something is critical, and that’s a huge teachable moment. I think we have to be there consistently. The last thing I would say is you need to be where people are when they are in the ways that they want to learn. Social media plays a huge role in that. We’re able to be present all the time and at times when people are available, wherever they might be. I’ve said that when and where are now the same thing. You have a mobile device. People want information at the moment, whether they’re standing on a street corner or they’re in their house or at a store, wherever it might be. So we need to become comfortable with those notions.

What about the way or ways in which financial education is delivered? You’ve touched a little bit on social media, for instance. How much do you think that those delivery channels, how much that is contributing to the less than optimal financial literacy rates? How could that be improved by financial institutions by making the material more engaging or more accessible or written in a way that relates to how people like to receive information?

I think it’s critical. All the research shows that people learn in different ways. So providing materials and resources and tools to reach them in those different ways is critical. Whether they’re someone like me who likes to read, or somebody may be an oral learner listening to something like this podcast, and others might prefer video from a young age. The JumpStart Coalition for Personal Financial Literacy, and the Council for Economic Education have just updated their national standards for personal financial education. They provide great guidelines for what a student should learn, when and how, and the tools used to deliver them. As adults, combinations of reading resources that are accessible and easy to understand, audio learning, and short videos are critical because people learn in different ways and we need to provide all of those tools. I think finding partners as well, that are trusted in communities is critical so that you can earn the trust and be where people are and know that they can trust you in delivering information. That’s also really important.

Aside from establishing that trust, aside from having those delivery mechanisms that you spoke about, what else could banks and credit unions be doing to lift up the knowledge base for their customers?

This might sound a bit controversial, but I think be more like a payday lender. Not in terms of predatory lending, but in terms of how accessible they make themselves and the way they engage. If you walk into a payday lender, you’ll see something that looks like a fast-food restaurant. For somebody who doesn’t know anything about personal finance, it’s not nearly as intimidating as walking up to a bank with the stereotypical columns and the big doors and all of the stained woodwork and somebody standing at a counter way across a room with nothing that tells them what they need to ask or give them any indication of the services they’re trying to get. It can be intimidating. Finding ways to engage in a community and to be less intimidating, especially for people who are new to the financial system, I think is really crucial. You have to be welcoming and open and find ways that don’t frighten people away. I think that’s a key element, and that can be hard to do.

A lot of the upstart fintechs out there, obviously they are targeting a specific younger demographic. They’re doing it through… I think gamification is probably the wrong term, but they are trying to make a game out of it here, be it for investing, be it for saving, be it for other sorts of financial education. How are you looking at that—making a game out of it? Do we risk trivializing, do we risk maybe people making decisions for the wrong reasons or in the wrong way or with the wrong inputs?

I don’t think that’s the issue. With gamification, it’s a really interesting tool, but it has to be delivered in the right ways. I don’t think that just making a video game solves the problem because you then find yourself competing with all of those other video games that kids and young adults and now older adults are playing all the time. Personal finance probably won’t win out. But if you’re in a circumstance where you’re in a classroom or you’re in a setting where you’re teaching, having a gamified or more entertaining way to present financial topics can be very powerful, but it has to be coupled with the right setting and the right opportunity in order for it to work.

No doubt you watch the financial education space closely, and of course, you work with financial institutions as well. Can you name a couple of banks or credit unions that are in your mind doing it right, and how they’re doing it right such that it could serve as a template for others to follow or to be inspired by?

I can’t name specific Experian clients for matters of policy, but there are a number of them, many of them, who do education very well. What I would say is credit unions and CDFI’s, Community Development Financial Institutions tend to be better at it than large banks, in part because of their structure and their focus on community. They are smaller, they’re able to engage. There are large banks who do brilliant things in financial education and who are producing fantastic curricula and who are partnering with organizations like Experian with the Jumpstart Coalition for Financial Literacy, which we were a founding partner of 27 years ago now. Finding ways to engage and to create materials and resources that are very impactful. You look to credit unions, CDFIs and banks near you and online because there are great services out there from many of them.

Can you talk in a general sense about what some of those services might be, what they might look like that the credit unions and the CDFIs are doing?

From a credit union perspective, they’re engaging their communities directly, and their customers and members. They’re in the communities with partners and taking them tools and resources that speak specifically to their needs. So if you’re in a community where there are financial challenges in terms of low-income communities, that sort of thing… If you’re in a low-income community, they need to know about savings tools or banking tools that are low-cost and that are presented in ways that are very familiar. That goes back to some of the gamification; some of the exercises around having a spending plan as opposed to a budget, so the terminology they use. They’re also making sure that they’re speaking the language of the people they work with. That may be translating to multiple languages. It could be just familiar language, not sophisticated banking language. They try to eliminate acronyms, for example, that help to make it more approachable.

There’s a lot of focus these days on unequal access to financial products and services. There’s an expressed desire by many institutions to try to narrow that access gap. How do you see financial literacy’s role in creating more inclusion for those who now have less access?

I mean, it’s cliche, but true—knowledge is power. And even having a little bit of knowledge is powerful because it lets you know the next question you need to ask. And what we find is that by giving people knowledge, it helps drive financial capability because they make better decisions, which then results in greater financial inclusion because they’re able to gain access to financial tools and resources that help them reach their financial goals. It’s a pretty simple concept, but really important that financial knowledge start at a young age. One of the interesting things I’ve found is if you’re teaching kids in school, they go back to their parents who may have very little financial knowledge, and they share that. And the parents learn too, and they’re then able to make better decisions, which leads to greater financial success. And that’s the goal.

You’ve been talking a lot about the power of knowledge, the power of education, and how that can be impactful for people. But how scalable is this kind of financial education, this kind of disseminating of financial knowledge that you’ve been talking about? How scalable is it? I ask that thinking about just how many variables come into play, including that not everyone is in the same place financially, not everyone is in the same stage of their financial lifecycle, and not everyone is looking for the same financial products or services at the same time. So can you scale it? And if so, how do you do it?

Yes, it is. I mean, if you think about the fact that there are more than 220,000,000 people with credit reports—that’s ostensibly almost two thirds of the U.S. population. Most bank and others are trying to gain access. If we start young with new consumers in schools, and providing parents with resources because you learn at home as well. Giving them those resources early and then being there when they need you. Everybody, you’re right, is different. But what I’ve also learned is that, when we talk about credit or other financial services, you can be what I call “vaguely specific” and generally answer people’s questions on the whole, what they need to know fundamentally. And I think that’s where we need to start, because then you can provide that personal specific knowledge they need. But we have to start with foundational information that will then empower people to make better decisions and understand exactly where they need to be and where to go to get more specific information. So I think it’s a degrees question. You can’t provide specific information to every person in their unique situation, but you can provide the information they need to be empowered. Another analogy I use, it’s kind of like driving a car for most people. They need to know how to turn the car on, put it in gear and get where they need to go. They don’t really care about exactly how an internal combustion engine, or now an electric motor, works. So we need to give them fundamental knowledge and then they can go from there as adults.

As you said earlier, knowledge is power. And the more Americans that have that power, the better. Hopefully, with more determination and effort, we can get that D on the report card up to something a little more respectable. So Rod Griffin, senior director of public education and advocacy at Experian, thanks again for making time to be with us on the BAI Banking Strategies podcast.

Terry, thank you so much. There’s never enough time.

Terry Badger, CFA, is the managing editor at BAI.