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The X Factor—Financial Literacy and Personalized Financial Services

Americans’ finances and money behavior have been a subject of research for decades.

With rising costs of inflation and living expenses that feel almost unreachable, American debt is climbing. In aggregate, American household debt rose $2.75 trillion by the end of 2022 totalling $16.9 trillion. If we’re going to break that down, we collectively owe $986 billion on credit cards, $11.92 trillion on mortgages, $1.55 trillion in vehicle loans, and $1.60 trillion in student loan debt.

We know, we get sick to our stomachs seeing those numbers too. When we dial it in a bit closer, nearly 14 million Americans have more than $10,000 worth of credit card debt and 15% of credit card holders have been carrying over a constant monthly card balance since before 2006. In fact, nearly half of Americans rely on credit cards to cover living expenses.

When it comes to saving, Americans aren’t amazing at that either. Sixty-nine percent of working adults don’t think their retirement savings or investments will be or are enough to retire.[4] More than one in five Americans have no emergency savings and, while 33% of Americans report having an emergency savings—they don’t have enough to cover three months of expenses.

The evidence of poor money management among American adults isn’t only visible in their debt and savings behaviors, afterall, money is emotional if nothing else. Seventy-three percent of Americans report that their finances are the number one reason for stress—over family, work, and politics. The stress over finances is taking a toll on mental and emotional health, resulting in a loss of sleep, depression, and anxiety. The stress about money compounds for Americans, resulting in feelings of overwhelm and seeps into relationships; the number one topic couples fight over is money.

For the financial industry, leveraging financial literacy may be a strong foundation for designing more personalized experiences.

Key Recommendations

  1. Segment based on behaviors.

  2. Celebrate success.

  3. Provide comparison for context.

  4. Provide clear, immediate feedback.

  5. Acknowledge the negative emotions and address them.

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