Innovations won’t resolve personal finance woes
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A huge number of products presented in New York for the annual Finovate trade show were promoted as ways to help us better navigate our personal finances, so we can more effectively manage our money.
There were demos of web platforms that compare student loan and credit card interest rates, apps designed to make putting money in savings easier, and games to teach our kids how to manage their allowances so they don’t blow their piggy bank on the hot toy of the moment.
The show was fascinating in a techno-geek kind of way. But how much anything unveiled at Finovate is really helping anyone is another issue.
Many of the presenters promoted the idea — either tacitly or directly — that the vast majority of our personal finance problems are caused by our cognitive inability to master our money. But toss in a little Internet innovation and… voila! Problem solved.
Unfortunately, there is little evidence that our ignorance is the primary cause of our personal money woes. Yes, financial literacy is dismal, but it was equally as pitiful in 1980 — when our national savings rate was close to 10 percent, no digital wizardry required.
Instead, the evidence indicates that most of us are running into money problems because of a decades-long assault on our personal finances. The cost of everything from health care to education to housing has increased at rates significantly above inflation while at the same time, our salaries have stagnated.
As I sat in the audience at Finovate, the Census Bureau released figures showing that median household income had fallen again in 2011, and when adjusted for inflation, was where it was in 1996. There is no Web-based financial application that can compensate for this. The services showcased at Finovate are laudable efforts, but all they do, in the final analysis, is make a bad situation a tiny bit better. They cannot stop our personal economic implosion.