Gen Z wants to Save $: Lessons from #AmericaSavesWeek

Times are changing! It was an exciting #AmericaSavesWeek Feb 27-March 4 and much was learned. Check your socials for #ASW17 or #ASW2017 for loads of financial wisdom and motivation from a variety of institutions. If you ever wonder if it’s making an impact, remember a new generation “Gen-Z” grew up in the “Financial Crises” era with a different view  of money not seen since the Great Depression, so get ready to roll out even more financial literacy content to support their goals and share prosperity!

A study from the Gild featured on Marcomm.com explains:

“Yet Gen Z were shown to be a generation of savers having grown up post-financial crash, with 25% saying they would rather save for the future than spend money they don’t have and 22% saying they never spend on “unnecessary, frivolous things” because saving is so important. These attitudes were shared with the Silent Generation, with 43% and 25% of respectively.”

The study also notes that this is a generation that grew up with the internet and is accustomed to information being made available quickly on any modern device. It’s a long way from the dial-up modem days!

Feel old yet? THINK AGAIN! Traditional institutions like banks, credit unions, educational non-profits and 529 providers are in position to grow using a combination of new technology and time tested wisdom already present in your culture.  Technology is more socialized with Gen Z to where expectations for simple online tools has grown. They have goals and want to move forward. Will your organization help or hinder this process? Here’s a few ideas:

What is your narrative? Even if you think your organization doesn’t have one, or maybe it’s to “maximize shareholder value” (No small feat), your group’s goals are a piece of the greater story Gen-Z is living through.  Are you helping them get where they want to be? If the answer is a resounding “YES” then stick to it and continue to empower Gen-Z with your traditions adapted up to new technology.  Yes, you can promote financial literacy to a new generation of savvy savers and they want to engage your organization to do so!

Your content can provide both sides of the story: Let’s face it, it’s a noisy environment on social media. There appears to be a storm in every news cycle, and the cycles are happening faster than ever!   The good news is your organization does not need to pick sides on hot media topics (Education, Healthcare, Government are astoundingly media driven at times), it just needs to know both sides of the story.  If you are sticking with a principled narrative, you help people guide themselves through any situation using your concepts and ideas. Gen Z is very aware that a single story may be interpreted in many different ways, so instead of pushing an agenda, keep it simple and show both sides of the story while promoting honest dialogue.  Keep your comments section open to allow different views to participate and communicate perspective on your content.

Help with decision making first: There’s a lot of options! We’ve learned this first hand at Invite Education with software covering the financial variables related to college attendance. With over 4,000 institutions of higher learning plus a huge scholarship database, the best thing we can do is provide transparency and financial literacy fundamentals to help families make smart decisions.  We realize there is no perfect “one way” for everyone, so we take a “Consumer Reports” approach to the question of college choice.  This way anyone can use the resources and find what they need.  Just let people make their own personal decisions with your organization’s assistance.  This is far removed from the days of pushing product first on radio or tv.  It’s about targeting the goals of your audience first and providing value with products/services supporting those goals featured second.  Gen-Z is ready to move their life forward, are you ready to help?

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How financial literacy helps with college affordability

There’s no doubt that college is expensive.  Just ask any parent helping their son or daughter enroll this fall, or even file the FAFSA in preparation for next year.  College affordability is at the heart of the issue, but real potential solutions to the problem can be swept away under the daily sound bytes generated during this aggressive political season.  But politics aside, there is no easy fix for college affordability regardless of voter preference, leaving families to decide on their own how to navigate.  Let’s consider how financial literacy helps manage decisions about college affordability.

“It’s cheaper to save than to borrow”: Parents that recently started a family, and even more recently paid off their student loans are very debt conscious, perhaps spurring the trend of greater college savings.  The “How America Saves for College 2016” report from Sallie Mae shows that a full 57% of families are now saving for college, a 9% swing in just the past year.  screen-shot-2016-10-05-at-9-54-01-amIn particular, it’s millennial parents taking the lead on goal setting and developing a plan to pay for college, all hallmarks of financial literacy teachings.  It’s inferred from these findings that new parents recognize the importance of education, but are wary of student loans.  While Washington needs to work out the student loan mess, families are taking control of their savings plans to make a smarter and more affordable investment in higher education.

Using college financial calculators: It’s easier now than ever to make and compare estimates on college costs, student loan repayment and savings, helping families look at the big picture first.  Before zeroing in on a college choice, it’s wise to take a look at a wide variety of options for perspective.  Consider questions like potential financial aid eligibility versus the sticker price of select schools, or if the lowest priced option is really the best fit.  These questions are simplified with use of financial calculators as reasonable comparisons are grounded in logic, ensuring informed decisions on college choice.

Power of compound interest: Long term savers know one big secret. Over time their money can grow with the power of compound interest.  Financial literacy helps families harness the power of compound interest through simple knowledge, like demonstrated with the “Rule of 70”, to show how money can double over time.  While financial calculators help with the details, the impetus behind saving begins with the motivation to start early, rather than later, to make college more affordable.

Identify college value: Know thyself! If financial literacy can teach us one thing, it’s that everyone needs to make their own choices based on their own needs.  Financial literacy helps with perspective on this issue, recognizing that college value really depends on individual factors managed on the personal level.  When weighing the many variables, from majors, school reputation, and internships and compare them to facts like costs, student loan debt and out-of-pocket expenses a pattern is revealed.  Some colleges will be too expensive while others may be a bargain relative to the needs of the student.  Using practical teachings from financial literacy promotes sound decisioning through the process to make the college experience an affordable one.

Choose Words Carefully & Improve Business: A Lesson from the State Treasurer’s Conference

Conference sessions tend to blur together but not this one:  “New Word Order – It’s Not What You Say, It’s What They Hear.” Gary DeMoss from Invesco Consulting blew the doors off of the Treasury Management Training Symposium with a riveting 50 minute discussion on how financial institutions can obtain substantially better results by paying attention to the language they use with customers and prospects. Screen Shot 2016-06-21 at 8.43.40 AM For the skeptics out there, I don’t know Gary and have no relationship with Invesco so this is not an inside commercial message disguised as a social media tip.   It was simply one of those light bulb moments that I want to share with you. It was that powerful.

So what’s the secret?  Words matter. A lot.

Gary presented the science behind learnings with regard to word and phrase choices that make our customers receptive to our message — or angry.  None of us intentionally intends to infuriate our customers, but we might well be doing so unintentionally.

He handed out a deck of nine cards with words/phrases on the front and back, and asked us to signal the phrase or word we thought best registered with our customers.  Here are the pairs:

  1. Knowledgeable vs Experienced
  2. Minimize my losses vs. Maximize my gains
  3. Works as advertised vs. New and improved
  4. Financial freedom vs. Financial security
  5. Voluntary contributions to my retirement plans vs. Automatic contribution to my retirement plan
  6. Transparent fees vs. Straightforward fees
  7. Long-term strategy vs recovery strategy
  8. Diversified vs Not correlated to the market
  9. Investment Strategies vs. Investment solutions

Not one person in our entire group of more than 150 correctly selected all nine preferred words — in fact, half the group of financial professionals was knocked out after the very first pairing (which was not necessarily the one above — I likely mixed up the cards on the way home).  Only five people were left for the last pairings before they too were tripped up.   Thankfully, Gary said we’re not alone; only a handful of people over many thousands correctly identified all nine.  I’d like to meet at least one them to help me with next year’s NCAA basketball pool!

Here’s what I learned — Gary’s Four Ps when communicating financial language. Apologies if my cryptic notes didn’t capture all of the concepts but there’s enough here for you to consider.  If you need more (and I do), consider  his book “The Language of Trust: Selling Ideas in a World of Skeptics.”   My copy is in the mail.

  1. Positive and hopeful.  Words like “fees” make our customers angry.  Fees are everywhere and they raise the hair on everyone’s neck.  Avoid calling your charges fees at all costs.  In fact, “costs” are more palatable because they  don’t trigger those same negative reactions in consumers. 
  2. Plausible.  Consumers want credible messages in today’s world of the incredible.  “Financial Security” rings truer than “Financial Freedom.”  Financial freedom sounds unattainable for most but security is something customers understand.
  3. Plain English.  Enough with the technical jargon and phrases we financial professionals seem to relish.  The problem:  even the best dressed white collar types miserably flunked man-on-the street interviews asking about basic financial terms.   We may believe we know what our client’s know,  but many (most?) of our clients don’t understand or  misinterpret our language.   “Strategy” is more appealing than “solution.”  Good words include long-term, strategy and diversified.
  4. Personalized.   Customers want to know we’re thinking about them — not ourselves.  Use “You” rather than “I.”  Tell what your product does, not what it is and emphasize the benefits.

I already put this to good use in some material we’re providing to our customers. I hope you find it helpful too.  This session – among a group of generally very good sessions — certainly gave me plenty of food for thought on my way home.

 

What I learned at the 2016 Annual Conference on Financial Education

I was honored to attend the 2016 Annual Conference on Financial Education and EIFLE Awards ceremony at the Caribe Royal in Orlando (Waterfall Pic Above). The event featured educators from the U.S., Mexico and Canada dedicated to financial literacy, here are just a few of the highlights from this great experience!

People Care: There were so many great financial literacy leaders at the conference sharing their stories of inspiration.  There were authors, teachers, program managers, parents, students, economists, Ph. D’s, financial planners and regulators all in attendance.  The one thing they had in common?  They care about the people they serve and want to see improvements in the world of financial literacy.

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2016 EIFLE Award Winners!

Personal Finance is complicated, educators simplify: Often times financial literacy is lost on students when it becomes too complicated and difficult to relate to real life.  In truth, financial literacy can apply to everyone in many ways, but it’s not seen as important until it’s recognized as relevant.   Financial literacy teachers take a complex idea and make it easy for early learners to understand and appreciate the importance.  Additionally, we learned from behavioral finance educators that people can take action to improve their own financial circumstances through a combination of great knowledge learned in the classroom combined with real life “learning moments” that pop up every day.  Personal experience is the toughest teacher since it gives the test first and the lesson last, but when it comes to financial literacy curriculum, we can always learn from the experiences of great educators.

A greater mission and purpose: 

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Always “Land on your Feet”

Financial literacy is a huge topic, but after participating in many of the presentations, a greater narrative became clear. Attendees and presenters alike share a common purpose in helping their communities face financial challenges of all kinds.  They all matter!  Many organizations whether non-profits or for-profits see the advancement of financial literacy as a greater calling, whereby working together creates the synergy to improve an economy, allowing “all boats to rise on a common tide.”  John Hupalo, CEO of Invite Education shared his personal insight on the issues facing financial literacy for college attendance, citing the motivation displayed by Felix Baumgartner’s record breaking free-fall.  The success of being able to “Land on your feet” is something that all college students should not only strive for, but ultimately achieve as a result of their college experience.  Financial literacy leading up to college will help parents prepare their children by teaching them how to make smart choices as they choose a college.  This process will lay the  foundation for financial success after graduation.  College is just the first successful step forward for many in pursuit of career and life goals.  By providing a baseline of financial literacy to tackle this big question, we all have much to gain.

The Future is Now! 

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Financial Literacy for Life!

People are helping people with financial literacy and using technology to reduce the barriers of service.  I was fascinated by the diverse number of attendees sharing their unique ideas and experiences.  It’s realized that technology plays a critical role in simplifying the educational process, but too often we allow it to become a distraction.  When we see students plugged into their smart phones, it’s just another sign of the modern times.  Financial literacy is more important now than ever and is transitioning into the digital era not with fancy bells and whistles, but rather with clear messaging, consistency and intelligent targeting of audiences most in need of help.  Once teachers work to build relationships with students and prove relevancy of their content, the next step is embracing common technology to continue follow up with more valuable lessons into the future. Financial literacy is a step-by-step process where students can continue to learn throughout their life no matter how technology will change in the future!

 

 

 

Top 5 reasons for 529

April is #FinancialLiteracyMonth offering many reminders about the importance of saving. Thinking about starting a 529? Here’s 5 reasons why the 529 makes an excellent option.

1. It’s cheaper to save than to borrow:  It’s much more than “a dollar saved is a dollar earned” today, as many utilize student loans to cover the rising cost of higher education.  Having to borrow becomes a much more costly endeavor long term, where savings is a more attractive option.  For example, saving $100 per month averaging 4% rate of return compounded annually over 18 years would produce about $31,437.  If borrowing $31,437 at 4%, a 10-year repayment schedule would require monthly payments of $318.28 for a total of $38,194.24 repaid.  The $6,757.24 in interest costs may be a tax deduction in future years of repayment, but it’s clear that a little bit of early savings goes a long way to cover college costs.

2. No income limitations: Regardless of how low or high family income is, there are no income limitations associated with the 529 plan.  This is unlike the Roth IRA, a retirement savings program that is only available for single people making less than $116,000 per year or married couples earning less than $183,000 per year as of 2015.  Savers make saving a financial priority and are not limited by the 529 because of future gains on income.

3. Tax-free growth: Quite simply, 529’s offer a tremendous benefit of tax free growth.  Specifically, all earnings grow free from federal taxes.  Most states conform to the federal tax free treatment with 33 offering state tax deductions

4. Best savings option when considering financial aid: Families concerned their savings may affect their eligibility for need-based financial aid should take a look at the 529.  Ultimately, the way cash is saved is what’s most important. On the FAFSA (Free Application for Federal Student Aid) money saved in a 529 plan owned by the parent is weighed against financial aid eligibility at 5.64%. For example, $10,000 saved in a 529 could end up reducing financial aid eligibility by $564.  However, this is much better than having money in a standard savings account in the student’s name, where it can be weighed against financial aid eligibility by 20%. The 529 provides a superior vehicle for college savings given financial aid regulations for higher education.

5. Great for estate planning: Grandparents are finding creative ways to help fund college for their grandkids while retaining control of their assets as part of their estate.  Money put into a 529 is removed from the taxable estate, but grandparents are able to retain rights of control over the 529 account even when funding is typically used to cover future college expenses for their grandchildren.   Generally, the goal of estate planning is to reduce tax liabilities and provide assets to family members as efficiently as possible.  Under current tax law, you are permitted to gift up to $14,000 per year to another person for any reason without having to pay a gift tax or a generation-skipping tax (GST). This limit is sometimes referred to as the “annual exclusion amount.” With a 529 Plan, however, you are able to make a lump-sum contribution equal to five years of annual exclusion gifts to a beneficiary in a single year. This means that you can give up to $70,000 (if you are single) or $140,000 (as a married couple) at once, per beneficiary, without having to pay gift or estate taxes.

Learn more about Invite Education’s 529 search engine and college savings calculator, helping your institution provide families with savings strategies and grade-by-grade guidance every step of the way.

Request A Demo Today

 

 

 

 

How “The Rule of 70” Doubles your Savings

What is the “Rule of 70”?: This classic financial literacy concept provides vision for investors planning for college savings. (Also known as the Rule of 72)

At Invite Education, we help families apply that concept towards college planning everyday.

It’s simple: You can figure out how many years it will take for money to double based on a rate of return.

Take the number 70 and divide it by a growth rate.

Let’s try with an investment rate of return @ 7%.

70 divided by 7 = 10

10 is the number of years it would take for the investment to double.

So for example, a $10,000 investment would double to $20,000 in ten years at a 7% annual growth rate.  Simple enough.

Yet for most families in the daily grind, this concept is easily missed.  Especially during critical early years on an 18 year horizon to college.

Engage customers with simple solutions to complex college problems: Join our Demo

What we’ve learned:

Life moves fast while college planning remains methodical:  Consistency is key when distractions become the norm.  Providing your customers the means to achieve this defines superior engagement for financial services content.

There’s no time like the present, or the future: The power of compounding interest allows small investments to grow long term.  It turns out that it’s cheaper to save long term than to borrow later for college costs.

Your customers “most thoughtful” data; their child’s academic and financial future:  Higher education is high on the list for families with children.  We recognize the challenges, the benefits and most important the emotions that move families towards making smart college choices.  Isn’t it time to give your customers a better college planning experience?

The logical path: Once school choices are targeted, give customers the ability to plan step-by-step a clear path to college success while helping them recognize and compare choices based on costs and benefits.

Engage and deliver results with your organization’s products and services:  Your product suite may be excellent, but until engagement begins with the customer’s mind space about the topic the competition will instead pick up business.  Everyday more people search for solutions online to find answers to their most pressing college questions.  If you have products or services targeted towards that group, give them a platform that answers all the questions they have and collects an email address for targeted follow-up.  It’s just that simple.

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