By Byna Elliot, senior vice president, chief corporate community and economic development officer, Fifth Third Bank
My mother was an amazing cook. My home was always filled with the most wonderful food. My mother also had good financial intuition. If we had a big expense we knew was coming up, or if a financial emergency arose, she had a plan.
She would make flyers and post them around the neighborhood, getting weekend meal orders. My mom and her sisters would then do the grocery shopping, spend the day preparing these full dinners for dozens of families—and then deliver these homemade, delicious meals for Friday, Saturday and Sunday.
She then had the extra $500 we needed to get over the next financial bump.
This was before “microbusiness” became a common industry term – and well before the “gig economy.” It also was before financial education was as freely available as it is today. There are countless people like my mom who naturally can turn their passion into a little extra money or intuitively know how to budget their paycheck every month. Or effortlessly know how to manage debt—or avoid it altogether.
For those of us (yes, I include myself) for whom those financial talents may not come so naturally, there are technological tools, educational programs and other options to help us not only learn those financial literacy lessons, but effectively put them into practice.
Create a Household of Savers
Like so many areas of education, financial education starts at home. Saving is difficult when you’re trying to make ends meet, but you know the principles: reduce spending (grocery, cable, cell phone bills), increase income (microbusiness, government assistance, second job) or both. One key aspect you may not be fully developing, though, is creating better habits in your children.
If you are really transparent with your kids, honest about needs versus wants, and expose them to your family’s overall financial situation, they can help contribute to the family’s overall financial health. Tell them what you bring in and what your expenses are. Give them a small allowance—preferably not tied to chores is what I’ve found works well—and help them learn about long-term versus short-term finances. Let them see the benefits. Show them early on that even a small amount of savings can really add up.
In turn, they will be able to help the family keep expenses down and increase savings.
As they get a little older, you may want to pair additional expenses with building potential employment skills. For instance, you may ‘buy them that video game, but on the condition that they’ start taking programming classes. Maybe you offer them the cash you were going to spend on their birthday party—but require them to save at least half.
Getting them in this financial mindset will not only help your family now, but also help prepare them for the future.
Living Life Automated
There are so many benefits to automating aspects of your budget—so long as you’re still periodically checking in on them. For instance, having your monthly bills automatically charged to your credit card will keep you from missing a payment; that helps you avoid late fees and helps raise your credit score. By reviewing those expenses regularly, you also can track where your money is going each month – and make adjustments accordingly.
You also can automate where funds go from your paycheck—toward your IRA, to your HSA, to savings and even to a “fun money” account. Ensuring your monthly fun fund is adequately financed—assuming it aligns with the rest of your budget—will make spending that money a truly fun, enjoyable, guilt-free experience.
Part of financial education is learning the principles, and the benefits come from putting those principles into practice—but that doesn’t mean you can’t simplify and automate some of aspects of it.
Fifth Third offers tools like Fifth Third Momentum® and Dobot®, but there are also plenty of others out there. It’s important to find one that you’ll actually use to apply the principles you’re learning to improve both your financial education and your financial health. I recently heard from a high school senior who attended a conference in May at which I spoke. Since downloading the Dobot savings app, that student has been able to save $500. With 40% of adults saying it would be difficult to cover a $400 emergency expense—resorting instead to “carrying a balance on credit cards and borrowing from friends or family"—that extra cash saved over time is a game changer. That little bit is small enough that you don’t miss it, but it helps build your savings.
It can help someone else pay off debt, too. With student loan debt ballooning over the past decades, it’s becoming more and more difficult for young people to get out of the hole that paying for education can create. Our family decided to help out a family member. We all connected our accounts to her student loans through the Momentum app. Every time a charge was rounded up to the nearest dollar, that extra change went toward her student loans. With several of us contributing, collectively paying that debt, we’ve already paid off about $2,300.
Other tools may help you maximize your 401(k) contributions or employer benefits. In some cases, the tax savings will be such that you won’t even notice a change in your paycheck. Other apps will buy stocks and invest in funds for you, putting your money into the market as well in small increments and creating an opportunity to let your money work for you and for your wealth to grow.
Education with Action
Technology can help only if it’s coupled with action. For some people, like my mother, those financially savvy behaviors come naturally. For others, those principles have to be learned. Just learning them isn’t enough, though. You have to apply them.
People need to get educated about managing their finances and then adjust their habits and behavior accordingly. It’s hard. It takes time. Maybe some app or service or technology will be a permanent tool for you, or maybe it will be temporary. But start with those bite-sized actions, see it work in your life, build the mental muscles it takes to make strong financial decisions and then help others—children, family, friends—work toward their own financial education and independence.