Thursday, May 4, 2023

Ten Trending Topics in Financial Education

Today, I presented a general session program for financial educators and researchers at an online professional conference. My chosen topic was Ten Trending Topics in Financial Education. Below is a brief description of the ten trends that I discussed:

Inflation- The U.S. had an ascending 5% inflation rate (CPI) in May 2021 and a descending 5% CPI in March 2023 and many higher inflation rates in between. Inflation-induced price hikes on goods and services are like a regressive sales tax and hurt those with low incomes the most.


Interest Rates- Between March 2022 and May 2023, the Federal Reserve raised interest rates 10 times in an effort to decrease inflation by slowly increasing the cost of borrowing. The goal is a so-called “soft landing” (i.e., not slowing the economy too much to avoid a recession).


Savings Rates and Higher APYs- U.S. households are currently saving a lower percentage of income than they were pre-COVID. The savings rate was 9.1% in January 2020 and 5.1% in March 2023. Due to Federal Reserve interest hikes, annual percentage yields range from 3.75% to 4.5%, on average, for online savings and money market accounts.


Increasing Debt Loads- The average credit card balance was $5,805 at year-end 2022 and the average credit card interest rate in April 2023 was 24.2%. In addition, 72- and 84-month car loans are more common and 16.8% of new car buyers now have monthly payments of $1,000+.


Online Gambling- Online gambling in all forms (sports betting, casinos, poker, etc.) is on the rise and legalized sports betting has spread nationwide. As of January 2023, mobile sports bets are legal in 26 states with three states pending. Young males are especially attracted to this.


ChatGPT and AI- Financial practitioners are experimenting with ways to use AI platforms (e.g., ChatGPT) to enhance productivity. AI output often contains mistakes and should only be considered as a “rough first draft” for review and editing by a subject matter expert.


Cryptocurrencies- About 16% of Americans say that they have ever invested in or traded cryptocurrencies This has led to greater income tax scrutiny and calls for more government oversight by the SEC and/or CFTC after 2022 collapses of crypto lenders and exchanges.


Increased State Financial Education Mandates- As of April 2023, 18 states have passed laws mandating a semester-long financial education course prior to graduation. This means that more young adults will enter college, careers, or the military with personal finance knowledge.


Different Types of FIRE- Different paths to Financial Independence, Retire Early (FIRE) have emerged in recent years. In addition to Traditional FIRE, there is Fat, Lean, Barista, and Coast FIRE, all in recognition of alternative paths to aggressively saving 25x annual living expenses.


More Attention to Asset Decumulation- Baby boomers were “guinea pigs” for voluntary self-directed retirement savings accounts and the decline of pensions. Many are now scrambling to figure out how to create a retirement “paycheck” for life using accumulated savings. Asset decumulation is a “hot” topic for financial advisors, researchers, and fintech developers.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.



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