Author: Heather Vale
December 19, 2023
It’s never too late to build your digital financial literacy. Here are the latest skills for managing and protecting your money in the digital age
Financial literacy has always been important, but the digital era has impacted it in many ways. New technologies like online banking, cryptocurrencies, online subscriptions and other digital assets are changing the ways we think about money. Similarly, cybersecurity threats are impacting how we deal with scams and other forms of fraud.
In this guide, we’ll take a look at all of these topics, and help you understand how to improve digital financial literacy — for yourself and your kids.
Digital financial literacy is where digital literacy and financial literacy come together. Digital literacy is about being tech-savvy and effectively using computer-based platforms, products and services. Financial literacy is about understanding financial topics and practices. So digital financial literacy is knowing how to navigate and use financial concepts and tools in a digital world.
It’s almost impossible to avoid technology in the modern age, so digital financial literacy is becoming increasingly important. It’s a good idea to know what various types of financial technology are available, as well as when and how to use them and why they’re a benefit.
Once upon a time, your bank would give you a checkbook for your checking account and a passbook for your savings account. You would go into the bank with paper money or a paper check, fill out a paper transaction slip, give it to the teller along with your bank book, and wait for a printout of your current balance. The skill of balancing your checkbook was crucial because otherwise you’d have no idea how much money was in your account.
These days, all of that can be done and accessed digitally. You can even deposit a check through your bank’s mobile app by taking a photo and uploading it. You almost never need to go into a bank if you don’t want to, and in fact, more and more banks don’t even have brick-and-mortar outlets. Instead, these online banks arm you with a robust web-based account or mobile app for monitoring, moving, withdrawing or depositing your funds … any time you like.
According to the World Bank, two-thirds of adults across the globe use electronic payment processes. And even in developing countries, the digital revolution has transformed how people can access and use money.
The increasing reliance on tech to make financial decisions helps both institutions and consumers. Banks can immediately access your credit score and payment history when needed, and you can easily research and compare credit cards and other financial offerings.
Despite being ubiquitous now, online banking actually hasn’t been around that long. Some banks offered rudimentary account access through TV and telephone in the mid-eighties, but the first true internet banking was launched by Stanford Federal Credit Union in 1994.
By the turn of the century, you could get your account balance and other basic information through text message, which is called SMS banking. But modern mobile banking wasn’t a thing until smartphones became widespread, starting in 2007. Then Bitcoin was invented in 2008, followed by other cryptocurrencies. Now it’s safe to say that digital payments, online banking, and technology’s impact on personal finance won’t be going away anytime soon.
When you first hear about cryptocurrencies, they probably sound … well, kind of cryptic. And in fact, they are based on the science of cryptography (like a secret decoder spy ring), which makes them super secure.
Cryptocurrency is just another form of digital money, like the numbers that appear in your bank account. The difference is that crypto is typically decentralized, meaning not controlled by a bank or government. Many cryptocurrencies — including Bitcoin, the original one — live on a blockchain, which is a shared digital spreadsheet (or “distributed ledger”) literally made up of a chain of blocks. Computers make calculations and write each transaction into the current block on the chain, making it nearly impossible to reverse or hijack those funds.
While you don’t need to know more than this rudimentary description, it’s essential to understand that cryptocurrencies are changing the financial landscape. Some are designed for making purchases while other types are better suited to long-term investing. Younger generations like Gen Z have embraced and adopted the use of crypto, knowing they represent the future of finance.
Digital finance has reshaped traditional credit systems as well. You can now access your credit score through your credit card or bank account any time you like. That allows you to monitor and see at a glance how your financial habits have impacted your score, for better or for worse.
You can also apply for a credit card and get an instant decision, make payments and manage your cards online or through a mobile app, and even get real-time alerts for urgent issues. Gone are the days of waiting for a statement to arrive in the mail and then sending off a paper check and hoping it gets there on time.
When it comes to digital financial literacy, focus on mastering some crucial skills. Installing mobile apps and desktop programs, setting up notifications, reviewing accounts regularly and keeping them secure are all important steps.
Your smartphone or computer is your personal economic toolbox, and there are plenty of digital tools to help you optimize your finances.
Learning how to use these tools effectively will simplify your life and save you time.
Safety is an important factor during digital financial transactions. Legitimate payment apps, banking websites, and e-commerce platforms are usually extremely secure, but being aware of red flags will help keep you and your money safe online.
When you open a bank account, you expect it to be safer than keeping money under your mattress. But if someone can break into your house and steal your cash, they can also theoretically break into your online account. However, a little bit of know-how, diligence and healthy skepticism can keep your funds safe and secure.
Protecting your personal and financial information online all starts with you. Your biggest security hole can be your login information, especially if you use the same password for multiple sites or choose one that’s easy to guess. Some additional steps can also help you maintain privacy and security.
Your login habits may be lock-tight, but money always attracts fraudsters, so be aware of current schemes that try to bypass your security. Most online scams fall under one of a few categories, and follow similar patterns. Usually they play on your emotions and use a sense of urgency to prevent you from thinking logically.
When it comes to spotting scams, look for spelling errors, bad graphics, and anything that appears incorrect. Hovering over a link without clicking will let you see the destination. Also remember that your bank, the government or a charity will never ask for personal details in a message. And they won’t ask you to pay with crypto or a gift card. If in doubt, contact the organization directly instead of answering the questionable communication.
Education is a life-long journey, especially when trying to keep up with fast-changing trends. To stay on top of digital financial literacy skills, continuous learning is key. The good news is that it can be fairly quick and easy. Look into online courses, webinars, videos, podcasts, and blogs on the topic — many of which are free.
Digital financial literacy isn’t just about learning vital skills. It can also empower you to make better decisions and improve your financial situation. You can apply the knowledge you’ve learned to your own digital financial practices, like online banking and email management, for the rest of your life.
About the author:Heather Vale
For over a quarter of a century, Heather has been working as a journalist in all media: TV, radio, print, and online. After establishing her career in Toronto, she has been living, working, and playing in Las Vegas for the past decade. She loves pulling apart complicated topics to make them simple, fun, and easy to understand, especially in the business and financial niches. But she also enjoys writing about the personal side of life, including success, relationships, families, and pets. She approaches everything from a yin-yang perspective, so her passion for wordplay and entertaining metaphors is always balanced with an intense (and some would say annoying) focus on facts and accuracy.
This material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor, attorney or financial advisor. Readers should consult with their own tax advisor, attorney or financial advisor with regard to their personal situations.
They used to say kids would learn the “three Rs” in school: that’s reading, ‘riting and ‘rithmetic. But these days, plain old arithmetic (or math) isn’t enough. Finances are in a mathematical world all their own, and financial literacy is the understanding and use of skills that promote a responsible relationship with money.
When you have a credit card, you’re unfortunately attractive to thieves and other scammers. New schemes are surfacing all the time, and the ones that work best (meaning, the ones that bilk the most victims out of their hard-earned money) are the ones that keep making the rounds.