From credit building to wealth building: A closer look at Credit Karma’s new ‘Net Worth’ offering

As inflation rises, financial confidence is tailing off. 

Fewer Americans are feeling savvy about their finances this year (33%) compared to last (43%) in the face of growing financial challenges, according to a recent survey.

However, despite expectations of the continuing economic turmoil and financial stress ahead, Americans have kicked off 2023 with an appetite to grow and leverage financial literacy and digital banking tools to chart a course forward. More than 3 in 4 US adults with financial goals think they’ll make good progress this year on their targets.

In order to provide a new product experience to facilitate the financial journey for its members, Credit Karma has launched a new Net Worth tool within its app to help consumers make more informed decisions regarding their finances by providing them insights into a bigger picture of their money.

Consumers who have already ticked off some of their financial goals plan to embark on the next phase of their financial journeys. To make headway in building wealth and savings, they want to feel confident that they’re making the right decisions in order to maximize and protect what they’ve built.

In light of this, members are notified to link their financial accounts, such as a 401k, brokerage account, assets, and active debts like a mortgage, and other liabilities on opening the Credit Karma app. They then receive insights on things like their spending data, and time until retirement that summarize their total net worth in the form of a real-time snapshot. 

Having all these details in one place eliminates the need to manually log in to various accounts across platforms to know how things stand from a financial point of view. As part of the experience, members also have access to view their money movements through monthly transaction history.

The Net Worth experience launched earlier this month and is gradually rolling out to US consumers with a credit score of 720 or above, with plans to expand to a larger population in due course.

“From our research, we know that this population mostly uses Google sheets to do their financial planning, because no other tool allows for customization with everything all in one place,” said Ryan Steckler, GM of Prime and Mint at Credit Karma.

Helping build the Net Worth experience is the team from Intuit’s Mint, who joined Credit Karma earlier this year in a move to accelerate Credit Karma’s roadmap. Additionally, Intuit Data Exchange (IDX) fast-tracked the launch of Net Worth by serving as the core technology behind net worth accuracy, personalized insights, and financial product recommendations. 

“This next evolution of the product ensures members never outgrow our app, and that we have a compelling product for every American consumer, no matter where they are on their financial journey,” Steckler added.

Over time Credit Karma plans to leverage consumers’ financial data to provide a clearer vision of different opportunities and scenarios they can act on in order to grow their money – ranging from maximizing their credit card rewards based on their spending data or flagging investment fees they might be able to save on. 

Competitive edge?

Lately, many financial institutions have launched products and features to provide cash flow insights to their consumers in a move to better manage their financial operations, processes, and lives. 

Is the Net Worth offering any different?

Unlike its competitors, Credit Karma’s current product ecosystem presents many synergies with other products and features on the platform, including Credit Karma Money and its insurance offerings that span auto, home, and life, according to Steckler.

The company expects these product synergies to grow as consumers’ product experiences evolve, whether through the Net Worth tool, Credit Karma Money Save (HYS) account (3.75% APY), or by way of insurance coverage to protect against financial losses.

Additionally, by providing customization and leveraging consumers’ financial data with the Net Worth offering, the company aims to serve more targeted content, insights, and products over time. 

Reaching the next generation: what’s in it for new-to-credit consumers and Gen Z?

While the Net Worth experience targets consumers who have made significant progress on their credit journey and are looking for that next financial health indicator to track and take action on – this poses the question if it expands beyond that segment of consumers?

Historically, wealth-building mechanisms have been geared toward a smaller population of consumers, but personal finance is much broader and there’s no one-size-fits-all financial journey. On the other side of targeting specific groups of consumers, the personal finance feature can be put to use by consumers who are still new to credit and are working their way up.

Investing and having less-than-stellar credit are not mutually exclusive – a consumer might be in a situation where they have credit card debt and their credit may need work, but they still have the opportunity to invest or contribute money to a 401k, for example.

“For consumers who might be trying to figure out when to prioritize paying down debt and starting to build savings, a product experience like Net Worth, down the road, should help them with that balancing act,” said Steckler.

When it comes to the nearly 40% of the scorable Gen Z US population on the Credit Karma platform – with recent movements like Financial Independence, Retire Early (FIRE) picking up steam combined with Gen Z having greater access to financial information, in all likelihood they will be interested in knowing, growing and protecting their net worth earlier on in life compared to other demographics. 

In fact, recent data shows that 59% of Gen Z have a retirement account, and the generation sets aside a median of 20% of their income for retirement, compared to a median of 15% contribution from millennials.

To reach and cater to this cohort, Credit Karma expects the new offering will assist Gen Z in suggesting ways of managing their spending and leftover money so they are financially stable today, while simultaneously building for their future.

Steps toward financial resilience

As recession fears climb, the unknown of what’s to come is one of the reasons consumers should be familiar with their financial standing, including how much debt they have, how much they have in savings, what their monthly living expenses are, and any potential major life events on the horizon. 

This way, they can recalibrate their budget in an effort to pay down debts and cut back on discretionary spending that can help to free up extra cash to put into an emergency savings fund, according to Steckler.

Consumers should also be cognizant of their spending behaviors, as spending habits are closely tied to emotions. In fact, recent consumer data from Credit Karma found that 39% of Americans identify as emotional spenders, while nearly a quarter of Americans say their emotional spending is leading them to overspend and go into debt (24%).