‘Would you rather talk about your weight or your money to your friends?’: Acorns’ Kennedy Reynolds
- In 2021, 60% of Americans couldn't pass a basic financial literacy test.
- Financial platforms consider it their responsibility to educate customers and offer the tools to help them make good life decisions.
Fintechs have come to understand educating customers as one of their key tasks. An example of one such fintech is Acorns — a digital banking and investing platform with 8.2 million active users.
Acorns’ customers can invest with whatever little capital they wish to get started with. Its Round-Up feature allows customers to take the spare change they receive from daily expenses like buying groceries or fuel and invest it into an ETF. The firm’s diversified portfolio program lets users invest in portfolios built by experts with as little as $3 a month. Similarly, another service allows customers to set automatic recurring investments starting from $5 a day, week, or month.
The concept behind all of these offerings is simple: customers use the little money they can to invest, collect those funds in an investment account, and watch their money grow. Through a variety of short-term and long-term investment opportunities, the firm wants to help people get into the habit of investing over time.
And education is at the heart of the Acorns experience. “Education has always been fundamental to what Acorns is about,” said Kennedy Reynolds, Acorns’ chief content and education officer, at Tearsheet’s Acquire Conference in February.
“You can't really achieve our mission, which is to look after the financial best interests of the up and coming, without education.”
The company philosophy is to not only provide users with the tools but also the confidence to use them effectively. In Reynolds’ words, to be financially confident is to be financially literate. To that end, Acorns started a user education program, called Grow Magazine, in partnership with CNBC.
With Grow, experts guide rookie investors on how to act in light of market news and current affairs, and how to think like investors. These things are important, especially on the back of a culture that still holds talking about money as taboo.
“We did a survey a few years back, and one of the questions we asked was, ‘Would you rather talk about your weight or your money to your friends?’. We learned people would rather talk about their weight,” Reynolds shared.
A large part of helping people build good investment habits is giving them the right positive reinforcements. For example, when someone invests five dollars in spare change automatically, the app notifies them about it. Most people don’t think about the spare change they get, but when they see it accumulating over time, it gives them the confidence to keep pushing. Such reinforcement may serve to help the education stick with people.
Acorns also added a new feature to their platform, called Milestones, to serve that purpose of positive reinforcements better. Users can set milestones for themselves based on their actions on the platform — like educating themselves, investing for themselves or their kids, and getting the satisfaction of accomplishing them once they do.
“Big goals are fantastic. It's great to have them — I have them, and I'm sure everybody does. But I think setting those small goals on a daily, weekly, or monthly basis, and being able to say, ‘This month, I was able to put away 20 bucks,’ - that's also a big deal.”
“We want people to be able to feel that,” Reynolds said.
Over the years, the form factor of education has also changed. Today, a lot of educational content doesn't look like it did some years ago, with things like pamphlets or brochures. In the digital age, one key new player has emerged — the influencer. Firms like Acorns are using influencers to break down complicated topics like diversification in more fun and everyday ways. According to Reynolds, the best place to educate customers is in the product — that’s where the company catches their attention and they are able to make direct decisions.
However, even with all this focus on education, there is a fair bit of responsibility that falls on Acorns with regard to advising their customers through tough times and helping them manage risk. It's important to make sure that customers understand the decisions they're making when they're making them. For example, in the event of the market failing, customers may feel the need to get their money out, but in some cases, it may be better to keep their money in — and that’s where the firm should be able to assist them, with things like portfolio diversification, automation, and advice.
Children and financial literacy
Acorns runs an investment service aimed directly at kids, called Acorns Early. It serves the company philosophy in that it motivates parents to start saving for their children early on in their lives, with recurring investments. These accounts are designed to be easily transferable to the children when the time is right, and they offer savings and investments from partners like Disney+ and ABCmouse.
The firm also wants to use the service to promote the need for financial literacy within family setups, creating an environment where parents and children learn together.
“I kind of equate it to eating vegetables. If I tried to get my kids to start eating vegetables at, you know, 12, it might be too late to start that pattern. So, at least just start kind of helping them think through and educate themselves and feel confident about why,” Reynolds said.
Beyond the scope of investment applications, formal education can play a key role in improving child financial literacy, and administrators are beginning to understand the importance of that. Today, 45 states in the US include personal finance education in their curriculum standards for kindergarten through grade 12, with 37 of those requiring the standards to be implemented by local school districts. A few years ago, that number stood at 17.
There is growing confidence that younger generations will turn out more financially literate, and hence more confident about their finances, than older ones.
“I think time will tell, in probably short order, what the ratio is between access, or education, and confidence. But I think all of this investing craze and access is encouraging younger people and all people to really want to get in on it,” Reynolds said.