A Killer Money Saving App Does Exist, and It's Better Than Sex

Ok so not sex exactly, but something a lot like it: financial literacy.

Let me explain. ??

In a 2014 study from Management Science, researchers found that efforts to improve financial literacy do not lead to better long-term financial behaviors.

Yet many of the budgeting apps that exist today, Mint included, focus on financial literacy, or education around finances, including where money is going, and where it should go.

Budgeting, the practice of estimating income and expenses for a period of time, is based on the same beliefs as financial literacy: that knowing where we want money to go, and what we should do with money, is enough to take financial action.

But knowing isn't enough. And budgeting isn't working.

If knowing and budgeting worked, we wouldn't be in an economic environment where 74% of Americans say they have a budget, yet 78% of Americans say they would struggle to pay bills that if their paycheck was delayed just one week.

Imani Moise, author of the Wall Street Journal article that inspired my response, There's a Reason a Killer Money Saving App Doesn't Exist confirms what I've spent countless hours trying to uncover:

"There is little evidence such services move the needle much for people who aren’t already engaged with their finances."

It's the people who aren't already engaged with their finances that we're interested in helping - they do want to improve their finances, and they do want help, but fintech has failed to address their needs.

Two reasons financial literacy and budgeting are no longer enough to help Americans make healthy financial choices

1. The standard advice older generations could follow to build wealth is no longer relevant.

While budgeting advice usually focuses on 'needs,' 'wants,' and 'savings,' our needs are now about 70% of our income, leaving very little for savings and wants.

• After accounting for inflation, home prices in the last 50 years have jumped 118%, while income has only increased by 15 percent in that same time frame. ??
• Hospital services are 225 percent more expensive than they were 20 years ago.????
• And a 2020 study by the Congressional Budget Office shows that between 1995 and 2017, the balance of outstanding federal student loan debt increased more than sevenfold. ??

It's no longer about building a solid budget. For most Americans, financial health requires creatively navigating unaffordable costs of living.

2. We're not logical when it comes to money.

What we think, feel, and believe about money is running the show: 90% of our financial choices are driven by emotion.

So here's where sex comes into play. ??

"[Financial literacy] is like promoting sex education that talks about penises and vaginas while never discussing what it's like to be madly in love with somebody, so in love that your brain stops working. For sex education to be effective, it has to deal with real-world circumstances and behavior. It has to teach about psychology and emotions, not just body parts. The same is true with financial literacy."

?? J.D. Roth, Get Rich Slowly

No one thinks it's a good idea to go into debt buying things they can't afford.

No one enjoys panicking every time they have to put an emergency on a credit card, or move back in with their parents after losing a job or leaving a bad relationship, because they couldn't save an emergency fund.

No one looks at their budget every month, sees they overspent again, and is happy about that.

And yet... they do it. Over, and over again.

I know, because I lived this.

I'm a former actuary, with a degree in finance, married to a CPA. Financial literacy is something I can do in my sleep. My 1st grader can do 8th grade math. We ?? are ?? numbers people.

And when I was 28 years old, I became a new mom with $80,000 in debt, and no savings other than my 401k.

I had paid off $20-30,000 in credit card debt every single year for the past 7 years. I was stuck in a debt cycle that no amount of money could get me out of.

Basically, I was ignoring all the red flags and jumping into bed anyways.

What finally worked for me to do better with money, and has since become the foundation of our money philosophy at Bolder Money, was addressing my emotions around money, and gaining control over them.

Emotions are Everything

Incorporating behavioral science into financial apps is smart, and can have a positive effect on users who are engaged with their money. Behavioral science usually presents as nudges, gamification, and auto-savings mechanisms used by products like Acorns and Qapital to get people to put away savings without thinking about it.

But for Americans who are struggling to cover their lifestyle costs or get in control of their emotional relationship to money, a deeper approach based on the science of emotion is necessary to help them find financial success.

Bolder Money members come to us from budgeting apps every day, and share the following reasons why an app didn't work for them:

• "I downloaded the app, but wasn't sure what to do next and felt stupid"
• "I couldn't handle the thought of seeing all of my debt"
• "I was too ashamed to review my transactions"
• "I used it for a while but kept missing my budget, and gave up"
• "I felt like everyone else was doing well with it, so there must be something wrong with me that I couldn't figure it out"

These reasons for churn are not something more financial literacy, nudges, gamification, or fancier budgeting tools can solve. They are the result of negative emotions around money, or a lack of confidence.

And those negative emotions are the key to a successful money app.

Financial organization and budgeting aren't simple when emotional money baggage makes it hard to face the facts.

Empathy and emotional understanding are embedded into our onboarding process, and in every interaction with our team and product. We focus on how our users are feeling every step of the way, and provide support and compassion to encourage them to keep going.

And it doesn't stop there: heartfelt interactions are important for users to feel supported, but providing awareness and guidance for managing their emotional relationship to money is critical in helping them make healthier financial choices that last.??

What Consumers Want

Mindfulness apps have crept up to be almost as popular as in-person counseling, with 38% of consumers who spend on their mental wellbeing reporting they use mindfulness apps, and 39% using in-person counseling.

Noom didn't become a weight-loss powerhouse by throwing tech-enabled healthy-eating guides and meal trackers at their customers; instead, they incorporated human accountability, mindfulness, and gaining control over the emotional relationship to food and exercise.

They went deep into the mindsets of their consumers, to teach them how to make lifestyle changes that last.

They stopped pretending like diets worked, and gained millions of users who were sick of being told there's something wrong with them for not being able to stick to one.

Likewise, the 78% of Americans living paycheck to paycheck don't want (or need) more budgeting - they want emotional support, human accountability, and personalized, compassionate guidance.

Bolder takes a similarly mindful approach to money, and it works. We're not just throwing more nudges and features at consumers, we're helping them build healthier relationships with money, and make changes that last.

Yes, we've got a budgeting tool, but we call it an Intentional Spending Plan and it allows users to attach emotions to their transactions, which they then use to identify habits to break and lifestyle changes to make.

We have a saying that we use to guide our coaching, our process, and the way we build: "Ensure each client is safe and held on a clear path to achieving their goals."

The goals and the clear path are important, but the feelings of safe and held are critical.

So I might be biased, but a killer money saving app does exist - it just looks more like a mental health app, and it's what America desperately needs.