By Anita Woods, VP of Product at Cleo
For most adults, dealing with our personal finances rarely tops the list of ways we’d choose to spend our spare time. And for those in the ‘Zillennial’ age bracket (ages 24-29 years old),who are tasked with learning to manage their money in the midst of an economic downturn,it can seem like an impossible challenge.
It is widely reported that young adults are already experiencing worrying levels of money-related stress and anxiety – and the toll this takes on all aspects of our life, from our performance at work to our day-to-day wellbeing, can be huge.
While the current economic climate is likely to remain unstable for some time to come, at Cleo, we firmly believe that arming young people with the right information, resources and skills to better manage their personal finances, can at least ease some of the burden. The key is making financial education easily accessible for more young people – and crucially – in a format they can relate to.
Data doesn’t have to be dull – how can we improve financial literacy?
It’s an unfortunate fact that young adults don’t have the same level of financial literacy compared to older generations. Effective money management isn’t something you can learn overnight – it takes practice and experience. But today, Zillennials are finding themselves plunged into a particularly challenging economic landscape and are being forced to make big financial decisions, with minimal understanding and resources.
Data, however, has the potential to drastically improve an individual’s financial understanding and awareness – from effectively handling their monthly outgoings to their ability to save towards both short and long term goals. Indeed, we’ve found that 77% of Cleo users who log into the app for 15+ days in a month say their financial lives have benefitted as a result.
However, this only works if data is presented in an engaging and interesting way. The vast majority of traditional personal finance and banking apps display user data in an incredibly passive, retrospective, and frankly dull, way. This is a major turn-off for Zillennials, and does nothing to support them in making better, more informed, financial decisions.
Weathering financial storms through personalised data insights
The cost of living crisis is showing no signs of abating and we are all set to continue feeling the pinch well into 2023 as inflation, energy prices and basic household living expenses skyrocket.
And whilst we all feel it, knowing exactly where that pinch is hitting us hardest isn’t always obvious. For instance, do we really notice the cost of our workday lunch rising or that we’re getting less for more at the supermarket? If we sat and scanned our bank statements and compared them to previous months, we could probably work it out – but who has the time for that?
What if we could get that kind of data at our fingertips – and better yet – presented to us in a personalised way that actually resonates with us?
Using digital technology, we can now analyse an individual’s spending and savings habits, present them with personalised money insights and help them move towards their financial goals.. We’ve found that nearly two thirds of our users have said they are much better at managing their monthly bills with Cleo’s support and 84% say they feel better about their finances after using the app for at least one month.
Proactive insights link directly to positive behaviour change
According to the Global Centre for Financial Health, there are three main aspects to financial wellbeing: financial security, financial freedom, and financial control. When boiled down, this means that people need to be able to cover their basic needs, with money left over to fund what they truly value and enjoy. It’s also about being able to manage one’s finances in the here and now, whilst also keeping an eye on the future – including planning for any unexpected financial difficulties that might occur.
With this in mind, helping young people better understand the consequences of their financial actions – or indeed inactions – is paramount. And one key way to do this is by sharing key financial insights.
A prime example of this is overdraft fees – the average of which is $35 in the US. We found that we could reduce the number of people incurring overdraft fees by 10% over the next week, simply by delivering a proactive notification to them when they had a low balance in their account.
This is also applicable to credit ratings – a crucial component for anyone applying for a loan or mortgage. High levels of debt or missed payments are the biggest offenders when it comes to hindering credit scores, and these mistakes have consequences that remain on your financial record for years. Sending proactive notifications that remind people to pay their bills on time or pay off some of their debt, can all help work towards a better credit score.
In summary, the economic landscape is getting tougher by the day and for young adults who have yet to live through a recession, the future might feel overwhelmingly bleak right now. But if we can arm people with accurate financial data that is easy to digest and presented in a way that genuinely engages them, the more likely they are to feel prepared and confident when it comes to weathering challenging times and setting themselves up for a more stable financial future.