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Digital startups across the Nordics are looking to plug a knowledge gap in financial literacy, and are urging parents and education systems to introduce the topic to young people at a much earlier age.
There are many financial tools and apps for adults on the market at present. Although that is a positive sign of proactive problem-solving and digital assistance, it could also be construed as a worrying indictment of how much the average adult needs help with their personal finances.
“If we need a lot of tools for the management of our money as adults, then we’ll just end up with a host of algorithms and AI [artificial intelligence] tools managing our money because we’re unable to do it ourselves,” said Philip Haglund, CEO of Swedish pocket-money management app Gimi. “And that’s the scenario for adults who are completely digitally literate.
“There is also an alarming amount of people who grew up in the late 1990s and early 2000s, after cash began to be phased out but before the rise of digital apps, who end up at the enforcement agency or in serious trouble with their finances because they had no guidance or early education.”
Haglund, who is a professional footballer, has seen first-hand how frivolous people can be with their money without guidance. This stems from a surprisingly Nordic reluctance to address the subject, he says.
Financial literacy is not an issue that is talked about in Sweden. And as Georg Ludviksson, CEO and co-founder of Icelandic fintech Meniga said, it’s a familiar theme across the rest of the region, too. “It’s quite taboo to talk about finances here and very limited in the school system,” he said. “Some people would rather talk with their kids about sex than about money, even though it’s an essential life skill.”
Make mistakes early
Both Ludviksson and Haglund believe that people’s attitudes towards money are formed between the ages of six and 12. At this age, children can make mistakes without serious consequences, and can learn about important processes, including credit, debt, lending, bills, and the general value of money, which is often under-appreciated in adulthood.
“It’s my view that culturally, financial literacy and education has been appallingly ignored in all countries, compared to how important it actually is – especially in modern life when money is such a key reason for so many problems,” said Ludviksson. “Research shows that if you train and raise kids in certain ways to save money, then they’re far less likely to get into financial dire straits later in life.”
This is what Gimi is trying to rectify via its pocket-money management app, creating a safe space for children to learn about the consequences of poor personal finance without actually taking the hit of those consequences. Yet Haglund continues to experience a lot of resistance.
“Parents still don’t want children to deal with that responsibility at an early age or to even engage in that conversation,” he said. “Many think children shouldn’t even have money, let alone look after it, but it’s completely the wrong methodology to wait until they’re older to make those mistakes instead.”
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Both CEOs agree that to meet this challenge, a more positive relationship is needed, and digital tools have a role to play. Gamification and non-consequence management of personal finances is a clear way to make a breakthrough in the Nordics, especially considering the region’s renowned penchant for technology.
This is where Meniga hopes to play a key role – helping banks to digitise their offerings to better meet the needs of an increasingly informed population.
“We are trying to impact millions of people in a positive way with personal finance solutions,” said Ludviksson. “The path we chose, instead of launching our own apps, was to form relationships with banks so their banking solutions could evolve a role of personal coach application.
“Our population is tech savvy and the Nordic banks, 20-25 years ago, were early to digitise. Electronic payments and digital finance were quite an early concept in the Nordics, which means the digital toolkits available can be a catalyst for rapid improvement in this area – but only if education lays sufficient groundwork in people's childhood first.”
Gimi’s assistance for younger people has gone beyond pocket-money management in recent times. A “card test” was distributed to more than 10,000 children to assess whether they could handle real money. Once they were taught the logistics, credentials and security aspects of the card, the vast majority proved they could act responsibly with it when given the leeway.
“What we’re also working on now, and getting quite close to launching, is a financial literacy scale for children,” said Haglund. “We have created a 27-question test to find out how competent with personal finance children are. From this point, we’ll be able to utilise data and feedback to work alongside education and financial institutions and turn children into smarter adults with money.”
Fostering the next generation of entrepreneurs
Haglund acknowledged that the Nordics are unlikely to reap the benefits of these digital aids for at least eight years, such is the cultural shift that is required. However, the longer-term impact that enhanced financial literacy among children will have for the next generation of adults could be huge.
Not only will it reduce the amount of poor financial decisions being made, but it will also help to foster a more enlightened generation of entrepreneurs. This is something that Viktor Stensson, co-founder of AI-based accounting tool Bokio, has monitored closely since the Swedish company’s inception in 2015.
“Financial education is becoming more and more important, not only in the Nordics, but everywhere,” he said. “Financial solutions and products are evolving and new regulations, such as open banking, are breeding a whole new generation of innovative services. This gives us, as consumers, a much bigger selection to choose from, but it also makes the landscape a bit harder to navigate.
“We need to be even more switched-on to ensure we make the right choices, and that’s where an in-depth understanding of finance becomes really important.”
Stensson feels it is a duty among the startup community, in conjunction with parents and education systems, to encourage financial literacy at an earlier age so that barriers are broken down for individuals as they enter adulthood and run their own lives.
“When we founded Bokio, compliance was, and still is, a big hurdle for many small business owners out there, but it really shouldn’t have to be,” he said. “It is crucial for a company to have an in-depth understanding of its financial situation to succeed.
“I therefore hope financial education will become a mandatory part of the curriculum to ensure everyone has at least a basic understanding of the concepts of finance, both old and new.”