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.

 

 

Current Events in Personal Finance

At a recent virtual conference for financial educators sponsored by Next Gen Personal Finance, ten current trends that are impacting the world of personal finance were discussed.

Below is a brief summary of key take-aways:

 

Online Gambling- An estimated 60% to 80% of high school students, mostly teenage boys, placed a bet during the past 12 months and 36 states now have online gambling. Many students and adults think “the stock market is too risky, but gambling is not.” Ads for sports betting websites during televised sporting events are now commonplace.

 

Inflation- Since hitting a peak of 9.1% in June 2022, the Consumer Price Index (CPI) that measures inflation has been on a downward trajectory. Reasons include an easing of some supply chain shortages and smaller Federal Reserve interest rate hikes in recent months.

 

Bonds- 2022 was a bad year for bonds. Most people do not buy individual bonds but, rather, bond mutual funds that expose them to interest rate risk (the inverse relationship between interest rates and bond values). Bond values decreased with recent interest rate hikes.

 

Credit Card Debt- Most credit cards have variable interest rates and their average interest rate is about 20%. Credit card interest responds very quickly to Federal Reserve rate adjustments. Credit card debt has been increasing, evidence that families are being stretched to pay bills.

Savings Account Interest- Consumers have to move their money to niche online banks to earn attractive rates of return. However, inertia keeps a lot of money still sitting in big “brick and mortar” banks, which have little incentive to increase their interest rates very much.

ChatGPT- The tech world is abuzz about this artificial intelligence (AI) platform trained on a data set of human conversations. There are mixed impacts for education. Teachers may find it useful to write multiple choice questions but will probably have to eliminate take-home essays.

Cryptocurrency- Crypto values had a bit of a rebound in January 2023 after experiencing a series of negative events in 2022 including the collapse of the crypto exchange FTX and the failure of several so-called stablecoins. There are increasing calls for government regulation.

Financial Education Mandates- At the end of 2022, 17 states guaranteed a one-semester high school course in person finance as a graduation requirement. 2023 is expected to be an active year for additional mandates with 30 bills introduced in 10 states in January alone.

FIRE- An acronym for Financial Independence, Retire Early, FIRE proponents espouse living very frugally and investing more than half of their income in early adulthood to shorten  their working years. Being free from a 9 to 5 job provides freedom to make choices to live life on your own terms. A common goal before leaving work is to save 25x a desired annual income.

Emerging Entrepreneurship Paths- Entrepreneurs don’t need to have an office or hire others. Three emerging paths for solopreneurs (one-person businesses) are the gig economy (multiple freelance jobs, with or without a “day job”), the creator economy (developing products and services), and being an influencer (making money by influencing the buying habits of others).

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.