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and a pleasure to be joined right now by
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Wendy De la Rosa who's an assistant
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professor of marketing at the Wharton
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School who focuses on improving
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consumers Financial well-being Wendy
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pleasure to have you with us today
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thanks for your time pleasure to be here
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it seemingly has been discussed quite a
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bit especially in the last few years
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that we're lacking in financial literacy
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and and people being able to kind of
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chart their own path about their savings
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where do you think we stand overall
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right now in dealing with this
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we know the financial literacy is
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associated and predictive of a host of
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Good Financial behaviors increased
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savings increase investing decrease
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spending but how do we actually
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translate that knowledge into action
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is pretty elusive
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um and so a lot of researchers have
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tried to look at what's the you know can
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we teach this problem away can we get
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somebody in a room can we teach them how
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to budget can we teach them about
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compound interest
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and will that change their financial
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behavior and in the literature the
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answer is pretty bleak uh most of the
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time there's very little impact of
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financial education on financial
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behaviors in fact there's a
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meta-analysis and done by
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Danny Fernandez John Lynch and others
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where they see it looked like 0.1
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percent of the variance in financial
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behaviors can be accounted for for
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financial education programs so not zero
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but pretty close to it right what we
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need is to be able to help people
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make do the actions that are useful to
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them so how can we make saving easier
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how can we make access to financial
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accounts easier obviously like it's
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always great if people can learn uh and
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you know increase their financial
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education and their financial literacy
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but what we really care about is not
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just that knowledge for knowledge state
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where we care about It ultimately how
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does that translate into Behavior
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but still that education piece becomes
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very important and obviously there are
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some schools that kind of bring some
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elements of financial literacy forward
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probably not enough that we that we need
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to have right now so that component of
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Education becomes critical to kind of
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get that process started doesn't it
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yeah you know what it depends right like
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you can imagine a world uh which is not
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the us right now but you can imagine a
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world where automatically right a
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certain percentage of your income goes
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to savings and do you need to know about
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compound interest you need to know about
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investing if it's done automatically no
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but to your point right I think
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education is great when it's coupled
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with experiential learning so learning
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by doing right I think there's this big
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push to get financial education programs
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into K-12 schools which I think is a
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great push if we're actually teaching
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our students
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how to open up a bank account
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and they're opening up a bank account
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themselves or you know the importance of
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credit scores but they're actually going
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through and checking their credit scores
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it's about learning by doing because
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at the end of the day right if we think
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about just even our health behaviors by
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and large people know what they need to
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do to live healthier lifestyles
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it's just really hard to do and it's the
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same thing with financial decisions
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right by and large people fundamentally
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know what they need to do right when we
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get into investing becomes a little bit
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more complicated but it's just really
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hard to do and it's really hard to do
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right now
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so you're talking about almost kind of
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getting it to the point where it becomes
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a habit for the individual to think
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about you know checking their credit
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score at least once a year or keeping an
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eye on their bank accounts and looking
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at these different components make it
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part of the daily process or weekly
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process whatever that that uh that level
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of intent is so that they keep it you
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know at the Forefront of their minds
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well I think I'm talking about more
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changing the environment is probably
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more important in this case for most
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people than you know
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spending billions of dollars and trying
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to change how they think about compound
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interest a concept that is just really
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hard for anybody to understand because
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our minds are not set up to to do that
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well right
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um and so you know what's a tip for
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people my biggest
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sort of suggestion is always to take a
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personal finance Health day when we're
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sick we take a sick day when we need to
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deal with our mental health challenges
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we can take a mental health day
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most of your listeners probably know
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that they need to increase their
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retirement allocation or that they need
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to finally get around to finding that
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long-lost 401k from that employer three
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years ago or cutting off that
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subscription that you know you don't use
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and it's just wasting money or pulling
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everything together into one aggregated
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account so you get a sense of what your
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financial picture is right in fact in a
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in a study that I ran 92 percent of
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households can list three or more
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actions that they can take in the next
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month to improve their Financial
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Security
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is just never the right time to do it
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because we're working because our family
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commitments because our our
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lives are just busy and so what I would
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recommend first and foremost is for
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people to take a look in the next week
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or in the next two weeks and just block
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out a day or half a day write out all
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the things that you already know that
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you need to do to improve your financial
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situation and love yourself enough to
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prioritize you for that day
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how then does something like the period
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of time we're kind of in right now with
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some of the uncertainties economically
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in this country does that factor into
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that that path of of having a better
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understanding around our finances
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yeah so many families right now are
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squeezed right inflation is slowing down
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but that that still prices are
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increasing
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and you know sadly who does that hurt
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the most it hurts lower income
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populations than most as interest rates
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rise too when you think about getting a
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loan or your credit card debt again
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who's hurt the most is lower at lower
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income and average average households
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average income households I should say
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and so you know there's probably a very
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small subset of people who don't
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understand or have an experience right
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the increase in grocery pricing and that
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they'd have to think about their food
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expenditures in a much more careful way
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than they had to do three years ago
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I think now more than ever is when we
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have to get our debt in shape
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so for a lot of people they hadn't
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thought about for example like calling
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their credit card company and
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negotiating a lower interest rate which
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you can always do right or calling their
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credit card company and saying you know
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what like this payment date that you
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just randomly gave me of the 25th of
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every month doesn't actually align with
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my payment timing right like I don't get
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paid on the 25th of every month and
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maybe the 15th is a better day for me
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it's all about setting up your
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environment especially your debt
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environment in this High interest rate
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environment
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to work for you
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and that's what I want people to take
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away from all of this is to say look oh
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people know this
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and it's now about setting that plan
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into motion and you need time to be able
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to do that right people fundamentally
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know that they should pay their High
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interest credit card debt first versus
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their lower interest but you have to
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create a plan and you have to allocate
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and you have to go into your banking
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portal and set those amounts
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all of that takes time
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and again taking a personal financial
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Health day
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may be your solution if you if that if
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you're in that vote
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and probably a lot of people don't even
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still to this day consider that you can
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do some of those options that you just
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laid out in terms of reaching out to the
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credit card company and negotiating the
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day that you make that payment or trying
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to negotiate that lower rate just the
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understanding of that I think at times
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uh is not where it needs to be
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you're absolutely right I mean
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you know some credit card companies make
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it easier for you so you can do it
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online but a lot don't and even things
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as simple as look I have all of these
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subscriptions that I've accumulated over
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time I have to go and and delete some of
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those subscriptions that seems easy in
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theory
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but a lot of these firms right you can't
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cancel your subscription online you have
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to actually call pick up a phone and
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call and then they make you wait for 20
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minutes until you call somebody and you
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have to repeat yourself three or four
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times to say no I don't want a lower
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price I just want to cancel the
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subscription right the environment we
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have to remember that most companies are
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getting smarter faster and better at
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helping us part with our money
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and they're creating that environment
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intentionally so and so it's almost up
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to us to recreate that environment for
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ourselves and making it a little bit
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harder for us to part with our money
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right and to save
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I I think I know the answer this next
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question I'm going to ask you but it
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would seemingly be a fairly significant
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benefit to people to the culture to the
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country if they did have this knowledge
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to be able to act on that when you think
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about you know what the benefits could
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be longer term down the road to have
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this knowledge and to be able to act on
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it as well
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right and that's what researchers call
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just-in-time interventions right we have
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to be able to deploy these
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tools tips tricks knowledge education
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whatever you want to call it at the
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point in which people can actually do
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something about it right like me telling
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you when they eat their hey you can call
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your credit card company and negotiate
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your interest rate down because probably
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when you opened up your credit card
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you had a lower and more risk of lower
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credit score and a more risky profile
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than what you have now
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that's great to know in The Ether but if
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I can't act on it right now or soon
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thereafter
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then what happens just like with
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everything right life gets in the way
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and we just forget right and sort of
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that knowledge sits there and doesn't
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translate into action and so I think for
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us we have to think about how do we
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deploy
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these tips in
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a way that people can actually act on it
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Wendy great to have you with us today
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thanks very much for your time and your
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Insight
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well it's always a pleasure thank you so
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much Dan thank you uh Wendy De la Rosa
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who's the assistant professor of
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marketing here at the Wharton School
