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Americans are feeling the strain of the rising cost of living as worries about a recession grow. A study from the American Psychological Association’s 2022 Stress in America Survey reports that 83% of Americans surveyed were feeling the punch of inflation, and more than 25% are feeling paralyzed from the stress. Financial woes are an all-encompassing stress that puts a burden on relationships, families, employers, and society. As this NPR article notes, financial stress can impact an individual’s job performance, economic decisions, and family life, and can lead to a “downward spiral into a poverty trap.”
Improving financial security is not a new challenge. There are a plethora of resources available, but they are not universal. Understanding them and knowing how and when to use them can be overwhelming or inaccessible for many Americans. Convoluted financial language, costly subscriptions, and not knowing which tools to use (and when) are some of the barriers. The more commonly used term “financial literacy” assumes that someone is either literate or illiterate, while financial fluency recognizes that someone’s financial knowledge can improve and change over the course of their life. Everyone has different needs and pain points on the pathway to becoming financially fluent. Young people, women, rural communities and Black and Brown communities have nuanced and different needs, as do athletes, gig workers, celebrities, and stay-at-home caretakers, to name a few. Innovation is needed, not to flood an already crowded marketplace of financial fluency resources but to fill gaps in access to capital, education, crisis support, and other interventions. Additionally, systemic barriers do not allow many to access the tools and education needed to become financially fluent.
"Financial Fluency is an understanding of savings, investing, debt (and institutions) that leads to a clear sense of financial well-being, financial empowerment, wealth creation and most importantly, self-trust." - Blair Smith, Senior Director, MI Finance
The reality is that most of the American population lives paycheck to paycheck and needs support. Helping people understand the tools of the financial system would empower them to make sound financial decisions throughout each stage of life. Financially fluent people trust themselves and feel confident in their financial decisions, can spend and save wisely, and can plan their financial futures to ensure wealth creation.
There is a great deal of work that needs to be done before this is possible. The good news is that financial fluency is quite easily divided into more manageable parts, each with a unique approach to try to alleviate the burden on different segments of the population. The challenge for funders is deciding where to start and assessing where an infusion of capital can move the needle. Other donors have begun to include financial fluency programming in communities they support, offering an example for others who might not know where to start, or how to go about adding a financial fluency component to their existing work. There are a few noteworthy examples of ways a funder can get started:
- Engaging with organizations already working in the field such as Jump$tart and Financial Literacy for All to find places for innovation. The Milken Institute also has a body of work, including an Inclusive Capitalism Program focused on the importance of diversity, equity, and inclusion across the business community and asset management and a Lifetime Security Program focused on financial security at all stages of life.
- Funding access to financial tools such as FamZoo and Acorns for young people to learn how to manage their money and remove the burden of subscription costs.
- Exploring ways philanthropic tools, such as an innovation competition, could crowdsource solutions for an entrenched problem within financial fluency, tapping into a world of creative problem solvers.
Philanthropists have a wide variety of options to include financial fluency in their existing initiatives, or to add financial fluency as a new focus. The right partners, working together, could ensure that the path for financial fluency innovation is open and that more people have the knowledge, capital, and tools they need to build and secure wealth for a bright future.