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