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- [00:00]
Austin
Shanna, thank you so much for joining us on this week's episode of the Rich Habits podcast. We are really excited to have you on the show today because we're going to dig into that brand new report from the Capital One Insight center all about banking in the digital age. Some of these statistics that your team revealed about the American consumer and their financial habits were mind boggling. They just surprised me and definitely worth sharing with our podcast audience. So for those of you listening at home, Sheena shares a common goal with all of us, and that is to empower individuals with the tool and knowledge they need to navigate their financial lives.
- [00:36]
Robert
That's right, Austin. Financial literacy is more important than ever. And as time rolls on, all of our financial knowledge becomes more and more reliant on digital platforms. So according to a previous report from capital1, only 55% of American adults are considered digitally financially literate. Sheena, that doesn't sound very good. So we're excited to talk with you about what the heck that means and how we can work together to improve that statistic. So if you want to read the report for yourself, there's going to be a link shared in the show notes below. And thanks again for joining us today. So, Sheena, take a moment, introduce yourself, tell the audience a little bit about your journey, why you're here, and what we're going to talk about today.
- [01:21]
Sheena
Thank you for having me, really excited to be part of this conversation and thank you all for taking the time to feature this really important topic in your podcast. This is one of the trusted sources that people go to for financial information and it's really important that we educate consumers on the value of being financially literate in the digital age. And we've been talking a long time in this country about trends around financial literacy and how that's been tending toward only about half of the population. But we decided to look into this sort of newer context of this construct around digital financial literacy because it is important that as banking has moved online and people are using more digital tools to live their financial lives, that they are able to be as equally financially literate in that space as we hope they would have been. Before I come to this work as a recovering academic, I would say not the consistent journey that you would think to be doing this work. But on the personal level, it has always been really important to me to have strong financial literacy. And as a parent, it's even more important for me to make sure that my young kids are able to understand these concepts at an early age and be able to navigate their own financial lives, which is different than it was when I was young and all I needed to think about was saving coins in piggy bank. Even my young kids have the option to try to do that through some digital bank options. They can do some savings. They can even invest now in a way that I couldn't do as a youngster. And so the need to have access to financial education is so important. I will date myself, Austin, with this example. So really sorry to tell you, but my like affection for financial literacy started very early. I can recall being in high school in a club called Future Business Leaders of America. I did not know that I would be a business leader at this point. I could just remember being able and sitting in that club and learning about the power of compound interest. And that was a life changing concept for me early on to know that my money could grow at a different pace was just so empowering. And it's that feeling that I had of being empowered to really know that I could do something different with my choices to make money that I want to make sure no matter what I'm doing in my career that I'm imparting and sharing with others. And so personally, that's why I care about financial literacy. But in this work that we're doing with Capital One through the Capital One Insight center, it is very important, important to us as a bank who is on a mission to change banking for good, that we understand that we are here to help equip our consumers with the financial information that they need to thrive and to make the best decisions that they can in this economy.
- [04:17]
Austin
It is very important and we are super grateful that you've joined us. And it's something Robert and I take, you know, very seriously, which is this idea and this concept of the Rich Habits podcast is free to the masses. Right? We have Now, I think 6 million downloads across the entire catalog of the show. And that is now thinking about the millions of of people who've been able to learn about financial literacy on their cell phone over the last call it 18 months. So being able to bring you onto the show and be another resource for these people, especially the report we're going to dig into here is going to be really fun. So Robert, why don't you kick us off with some of the data?
- [04:49]
Robert
I love it. As financial educators ourselves, we take pride in consistently sharing the most relevant and important financial information to the masses. The report highlights that financial literacy levels vary significantly among different demographic groups, with Gen Z having especially low financial literacy rates. What Advice do you have for those looking to improve their financial literacy but don't know where to start? Because that's what we see the most, is people not sure where to go and where to start. And they let analysis paralysis get in the way.
- [05:22]
Sheena
You nailed it there. In this age, there's so much information out there from all kind of sources everywhere you click. You know, now you don't have to limit ourselves to any particular form like it follows us now when we want to access information. The real burden that I think all consumers have in this day and age is being able to sift through what is a reliable source of information, what is misinformation and not. And that's a bit of the challenge that because there's so much information that's out there, people don't know which are the things that we should be acting on, which are the ones you should just let pass and test to see if it's sort of information that you should ingest and move along. I think the good way to start is number one, find a trusted source. I think that that is the most important thing we learned through this study that a number of Americans really their banking institutions, for the knowledge that they're getting there and are going in their bank apps and online to access that information. But I'd also like to highlight government sources of information which are also very rich and we know that they're reliable. So look for a.gov in the online site for that. Treasury Department has really great resources that I think are helpful. I send my own kids there to do some of the games that they have. I know the government's not known for having the splashiest user interface, so they're not the most dazzling. But if you can tie a little bit of time to take off to do that kind of work, the information there is really, really great things like Social Security and learning that even for young kids, which I think is helpful. But I think the biggest thing is being able to access information in the moments that matter. And this is what we find when we look at a lot of financial education out there. It's trying to teach you everything under the sun in one fell swoop. And that's really hard. People don't have the attention anymore to sit through those things. So having bite sized points of information that are really useful to the consumer to meet them in that moment, that matters. I'm a new graduate from high school. I need to know what to do when I get my first job on how to allocate those things. Like how do I find those. Your podcast is a great resource for that. I recently needed to understand how to find some of my old 401ks and like found the thing that was helpful for that. So the more we can put things in chunks and bytes that are useful for the thing that I need to access when I need that information, that's going to help people find the information, but also get started to go from knowledge to action.
- [07:54]
Austin
And you know, talking about being there in the right time when people need that information is powerful. And we're going to talk about that a little bit more. I know that I think your report said it was like 42 or 43% of people look for credit related information in real time. Like the. That's like one of the most sought after pieces there. So we're going to get to that. But before that, speaking of education, there's clearly an education gap that needs to be addressed when it comes to finances. Your report said that 79% of consumers had an interest in learning about personal finance in the past year, but only 55% actually learned. Right. So that's 24% of these consumers. Nearly one in four have this unmet learning need when it comes to finances. So how can financial educators better connect with audiences to make these complex topics more relatable and more engaging? And what is Capital One doing to help solve this education gap?
- [08:42]
Sheena
Oh, this is so important. I don't love a thing where there's high demand for information, but then the consumer is not getting what they need from that, or people are walking away from content that exists because it's not being presented in a way that is very useful to them. And so I think consumers are telling us they're sort of voting with their attention when the way in which the information is being delivered is not there in a way that they're desiring it. I think, you know, one of the things on a policy level that's been very, very helpful. I think we're now at the point where 35 states are requiring some sort of personal finance or economics information for graduation requirements. This is just going to help consumers overall have a better baseline understanding around these. And so tackling it at a more systemic level is important. But I think in the ways that we're trying to do that through products at places like Capital One that are bringing the information to the consumer when absolutely need it. And so we have resources like our Money and Life program, which will provide budgeting tools and personal finance coaching to anyone who needs it, either virtually or in one of our Cafes, which has been really fun to know that you could go in and grab a cup of coffee and get some personal coaching. These are sort of resources that have been, I think, mostly available to a part or a segment of the population who have access to advisors and all of those things. But now since these this information is able to be provided through digital channels a little more affordably and you don't need the one on one person to deliver it, that access to real time personalized coaching and information is something that is being democratized and will be made available to many more. And so I'm really proud of the services and products that Capital One offers to be able to do that, to meet our customer in those moments. And I think that more of that kind of work could help us address this particular gap. One of the things we call for in this study as a response is a coalition based approach to get the information to people that they need right when they do it. And you can think about a future where there's good search engine optimization and where I absolutely am known that I'm on a pathway to buying a home. I'm going to be met with the most reliable sources of information for the kind of decisions I need to make along that, that pathway. That's something that I think is going to address that gap a little bit, Austin, that we see. If you think about it, when you're trying to buy a home and then you go and take a education class around that, you are hit with everything under the sun around that choice in terms of information and if we could take pieces of that, this is my first home and I'm in a high interest environment. How do I make a choice given those things that are in front of me that might be a better way to help the consumer actually retain and take away a lesson from the education that's being provided. I will take a moment to talk a little bit about our Khan Academy partnership. The reason we worked really closely with Khan and I'm very proud of that as someone who used Khan a lot in the classroom as a statistics professor.
- [11:56]
Austin
Yeah, best YouTube videos out there.
- [11:59]
Sheena
I'll tell you what the best videos that there are. And but one of the things that differentiates con in the market is it's not just providing those videos, but there is a skills based testing that comes along with it so that you could see that people have learned the concept and they're actually able to use it. I think that the more that we could move toward those kind of resources that help people really make sure that they have the confidence that they've learned the skill that they are seeking. The information to do will also be very helpful to close that gap.
- [12:31]
Austin
That is incredible. I'm just kind of looking in real time here at this Money in Life program on your website. I see. Guide yourself with a 5, 10 minute virtual tools, then meet with a mentor. Get three free 60 minute sessions with a mentor. I mean, talk about closing an education gap. This is exactly how you do it. This is really cool. I can't wait to check this out. More, please.
- [12:48]
Sheena
And these are resources that are there for the customer or the general consumer, which I find to be really helpful.
- [12:54]
Robert
And I think it's great that you're addressing the fact the Gen Zers and a lot of our youth don't go to banks. They do everything digitally. They're not going to go in and sit in a cafe with somebody. So having all of these tools out there and readily available online I think helps you really close that gap and get them involved. Because, you know, it's. We're not in an era anymore where everyone's just going to a bank to ask questions. So that leads me into my next question. With the rise of digital tools and apps, there are now countless resources available for learning about or improving, improving your finances. And we're talking credit monitoring tools, online search engines, you said banking apps, online video, social media and all that fun stuff. How do you think technology has transformed the way people come across financial education? And are there any specific platforms or tools that Capital One recommends within your suite or outside of your suite of offerings?
- [13:53]
Sheena
Yes. Thank you so much for that. As you noted, we found in the report that more than 8 in 10 consumers who use a bank's website or mobile app trust the information they're getting from that. So having the information available in the app when the user is there to make a transaction has been a really great resource of being able to target this information. What you don't want is a user experience where people need to go to a separate website or click through 5 different things in order to get the information that they need. If we could start pulling that information to be right close to the transaction moment, I think that's a really great opportunity to start to meet the consumer where they are and they are in these digital platforms. We saw not only like one or two, but you know, the people who answered our survey noted that they are using multiple sources of digital platforms in order to learn. Many of them are getting information from the bank's app, but also social media. And following different influencers who are providing this information. Our biggest thing is just to make sure that it is credible information so that people are not being led toward different insights that are going to be problematic for their financial future or lead them astray because there are so many tidbits out there and life hacks that people are all, you know, calling themselves financial educators to deliver, but don't really have the credibility to do that. And so that's one of our biggest things is these digital tools and apps, while providing greater access to the information, also come with a little bit of greater risk because it is open and accessible to anyone to also be on those digital tools and social media platforms to provide advice in information. And this is why we think this concept of digital financial literacy is so important, because it's about having the discernment to operate safely in these environments. And so it's not just can you click through your bank's website, that's a safe, confident, improving, you know, resource for doing that. But can you consume content on a place like TikTok? Can you be on your social media platform and have the tool to say, hey, this could be a little bit more of a scam than an actual real deal and know where to go for resources to be able to check out if that information is key. So I would advise people, if they are getting information through some of these platforms, to now, you know, try to triangulate that information. Listen to your podcast, check to see if there's something in another trusted resource that has similar information in order to make sure that they're, you know, bringing multiple perspectives around that. One of the tools that I really, really love that Capital One provides is our creditwise tool. I know, Austin, we can talk about this a little bit more later, but it is one of those resources, again, that's free, open to the general consumer. It provides credit monitoring, which I think is one of those things that is a useful pull for the consumer to want to look at and monitor their credit over time. But because it's getting that consumer in that moment where they're thinking about their credit, it's also delivering other information to help people build their credit and access information that moves them along that spectrum even as they're monitoring. And so I think resources like that are also very helpful. And the digital environment allows for more of that engagement with broader content.
- [17:21]
Austin
That makes a lot of sense now. I mean, kind of just to piggyback on that, Were you surprised by this data? I mean, for example, in your report, it says a whopping 59% of consumers say that they trust financial tips that they learn on TikTok. Right? Where do you figure this number was high? Which is why Robert and I take what we talk about online so seriously. But 60%, I mean, that's. That's pretty high. Were you surprised by this? I'm surprised by it.
- [17:43]
Sheena
I was not. When you have young people in the family and the kind of information I get in my family group chat about do this thing in order to like improve your credit line, and I'm the one who's always in the family group chat going, absolutely not. That is not.
- [18:01]
Austin
Let's not do that, guys. Let's not do that.
- [18:03]
Robert
One you so eloquently put it of how you describe this misinformation. We just call them fake gurus. People that have never taken a class don't know what they're talking about. They use chat GPT to come up with some content. And it's always around the crazy topics that we would never want to lead people down that path. And I think between that and shilling of products that are not beneficial for people's financial futures are the two biggest things that Austin and I really work towards preventing throughout our podcast and our Rich Habits Network. Because there's just so much of it, it drives me crazy. I want to get a tour bus and go door to door and tell them to stop because it's so bad.
- [18:46]
Sheena
You should do that.
- [18:48]
Robert
I wish we could.
- [18:50]
Sheena
We might need that.
- [18:51]
Austin
It really takes a tour bus. Robert and I are driving the bus. I'm driving. Robert's got the megaphone. Fake gurus. Down with the fake gurus.
- [19:01]
Sheena
I can see this. I can see this pair up. This is wonderful. Let's do it. Hopefully it doesn't take that, you know?
- [19:08]
Robert
You know, because we spend so much time every day, every month, people are like, oh, I'm gonna do forex trading or I'm gonna, you know, put all my money in an IUL or some crazy gimmicky product. And I'm like, look, Warren Buffett it the greatest investor of our time told his wife when he passes, put it in the s and P500 and Treasury bills and forget about it. That's it. You don't have to over complicate. And I think that is one of the biggest things that I love about what we do. And having you on today is getting people to understand, especially our youth. There is no get rich quick scheme that actually works. It's just tried and true things that have worked for decades and decades. And having the right plan of attack for your investment thesis is all that matters.
- [19:55]
Sheena
That's exactly right. And I think the key to financial literacy is the ability to be able to take that steady, long term view, know where to go. You don't have to know everything there is to know. Like we're not asking everyone to get a degree in personal finance, but it is being able to say, I know that I have a big financial decision coming up, where do I go for the information, how do I train myself in that moment? But also know it's a continuous journey. Like to me, like financial education is my lifelong passion, you know, and a thing that I have to learn at every point because I get, I face a new financial choice and a new decision at every point. When I have kids, I have to now think about insurance different than I did before. But now there's a good moment in time to dig deeper into that then thinking about a trust as I go on, you know, none of these were financial decisions I need to make in my twenties, but they are things that I need to make at a riper age. And so as I, as I go.
- [20:57]
Robert
On, hey, remember, I'm, I'm still older than you, so you're in good hands right now.
- [21:02]
Sheena
You're so kind. You're so kind. But it is really helpful to just let people, you know, understand that it is one of the things that you want to. A habit. Actually, I think that's a good way to target it within this audience. A habit to develop to just be able to know where to go for the resources you need to equip yourself. And it builds confidence. It really helps you to get rid of the ambient stress that finances can have. If you are constantly stressed out about whether or not you're making the right choice, whether or not you know enough to be able to navigate the choices in front of you. And I think that's why this really, really does matter right now.
- [21:41]
Robert
Well, it's so cool because when I came up, there was no Internet, there was no financial literacy in schools or whatever. Then when you came through, it started to gear a little bit better, but still not enough. Then in Austin's era, it got better again because there's more tools, more stuff on the Internet, ways to learn. So future generations really are going to be in the catbird seat between AI, all of the new tools and everything that is in front of them. So to be able to handle your financial wherewithal and understand and create a plan just gets easier and easier. Because if you think almost 85% of consumers reported seeking out financial education content during three specific moments in their financial journey, with activity trying to improve their credit score being the most common life event at 43%. And that took me back a little bit because that seems high to me that that would be the most common thing they want to learn over. How do I get started? What stocks do I buy? Or even worse, what meme coin should I yolo my money into? Because that's a big issue with our youth now too. So when we talk about crypto, it's always trying to get them on the path to follow along and build a base first. So we know that Capital One was one of the first credit card companies to provide credit access to consumers across all of these income spectrums. And I read that in fact, 42 million customers who opened Capital One accounts with subprime or no FICO scores have since achieved prime or better FICO scores. So that's very inspiring to me. So tell us, how is Capital One focused on educating people as it relates to improving their credit score and how did you pull this off? Because I think it's amazing thinking about what Austin and I are always preaching in credit and how to start and where to go and how to build credit. How did you guys achieve this? Because it seems pretty incredible.
- [23:45]
Sheena
Isn't that incredible? I just want to savor that for a moment. Robert, that statistic is really great. And it's the thing that makes me so proud to be with Capital One. I've been with mission based organizations my entire career. As I said, I was an academic working as a professor then in the nonprofit sector. And to see the kind of change that a bank like Capital One has made in the lives of so many American Americans is just profound. I mean, that is real data on moving people from no credit or below credit to prime credit scores. And that makes a meaningful difference in the lives of those consumers. Because as you know, having better credit scores give you cheaper access to the kinds of things we need like an auto loan or even better rates on renting an apartment. And so the money that comes back, back in the wallet, what's in your wallet, Americans, by having that credit score is really, really real. And so that comes through having great products, really being able to identify people who are ready for credit, and then owning as a company the responsibility to move people along the credit spectrum with the education so that they are equipped to make the right decisions as it goes along. As you know, having good credit is not a one time thing that you just hit every decision you make it could go up and down. And being able to understand what drives your credit up, how to pull it back down is something that we want the consumer to know and own and to be able to move with responsibly. We mentioned a little bit around credit wise. I think that that's been an incredible resource that has helped our consumers along that journey. It's not just a place where you go to get a number to understand where you are, but it features so much content on various credit related topics, topics, real time alerts on your credit behavior. So you know, oh, you might be moving into territory that could impact your credit and it demystifies that whole process. Remember a lot of things about credit scores to many consumers feels like a black box. They have no idea to understand what is going to happen if they do this thing. And there's so many misconceptions out there around what it's going to take to improve your credit score. Having a tool that is objective, that really helps you demystify, see behind the curtain in your own credit score and be the one who owns owns. The progress you make on that has made a real difference for our consumers. And I'm really, really happy about that tool. We also, in my role at Capital One, I help lead some of our philanthropic efforts. And so we make investments in a lot of groups that do credit building activities for people who have fallen and made mistakes with their credit to help them get back onto a good track. And they use things like our secured card in order to help bring them along the credit journey. And I think that those are also really great resources that are helping people, communities all across this country do well with credit. As you know right now you really can't operate in this economy without credit. And so being able to use credit responsibly I think is an important skill set that we are able to equip our customers with.
- [26:54]
Austin
I couldn't agree more. And fun fact, I'm actually one of the 42 million customers who opened up with SubPrimer. No FICO score. You guys were the first, was it called non secured credit card I ever had? I had like a 500 something because I was 22, I'd never had a credit card before. The only one I had was a secured card with my bank. And you guys were like sure, we'll give you a shot. We used that after like three years I grew my credit, I bought a house. Now I have another house. Now I've got a business and I use Capital One, the Spark Business Credit card with you guys. So I'm one of the 42 million. I mean, it works.
- [27:24]
Sheena
You guys have done some really, because it is for so many Americans, Capital One has been their first credit card or the place that took that shot on them to say, you know, you get a chance 100%.
- [27:36]
Austin
I was one of the people you took a chance on.
- [27:38]
Robert
But I also want to touch on why this episode is so important. And that is because as you're rebuilding your credit, I want everyone watching and listening to understand you don't have to have perfect credit. You're going to have ups and downs in your journey in your credit. But as long as you're monitoring it and using the right tools to do your best, that's what's important. Because I also think people live with a lot of anxiety over their credit score. And so it's so important to understand. And that's why I love these tools that we're talking about because it helps people release some of that frustration and anxiety to understand how to get to a credit score that works for them, like you said, so they can get these better interest rates and better loan rates and all of the above. So I want to make sure we touch on that as well because it's so important, because so many people think if you don't have an 800 plus credit score, you're doomed. And that's just not true. And I just wanted to touch on that just for a moment.
- [28:35]
Sheena
Definitely, thank you for that. It's so clear that that is really, really important. And that point about reducing the stress related to that, I cannot overstate that enough because really just being able to see how your credit score is a tool that you get to like. Having your toolbox to use for along your financial journey is so important and we have a lot of agency in the way in which we can sort of use that tool. So I think empowering folks to understand that is really a great benefit of this.
- [29:04]
Austin
Let's begin to now narrow down a little bit talking about the younger generation. Your research cites data showing that a Gen Z audience can only answer 28% of questions correctly about retirement related topics like how to save and plan for their retirement. So what unique challenges do you think that the younger consumers are facing right now regarding financial literacy? And how can we as financial educators better support them in overcoming these hurdles?
- [29:28]
Sheena
Oh my gosh, this is a hard one. I know when I was young I was not thinking about retirement in the way that I, I could have been at those ages. Although the compounding interests was a lifesaver that really set me up well for that. So I think knowing some little tidbits like that could be really, really helpful. The bigger thing with younger audiences again is really trying to help them understand why having that long term view early on is useful for them. It is so hard when you are just trying to make sure you have enough money to cover your expenses. Census where you feel like you don't have the space in your wallet to save and to start thinking about asset building and wealth building to move along those things. And retirement feels for so many people like it's so far off. That always feels like the kind of thing you can prioritize later. So I get it. I get the immediacy bias to want to pay attention to the financial decisions that are in front of you right now. So it's not the kind of thing where I would put a blame on a Gen Z er for not knowing those things. It also shows to us though who have Gen Z years in our family or are in a place that we model behaviors around that one of the things we don't do enough of is talk about these things more open how why am I making the retirement choices that I'm making? Does my child know how much I've allocated toward different funds and what risk profile I have in my retirement accounts? We are so hush hush about finances in our society that I think being a little bit more open about that. Having people who are in your family as we talk talked about earlier the trusted sources are banks and people trust things that they're finding on social media but really high in our study was also family and friends. Family and friends are still the number one source of financial information. And so if we as people who are in the family can bring more of our longer term view when we're closer to longer information like retirement over and share that information that might be helpful to have and then people are really focused on the major life change in front of them. Gen zers are just trying trying to figure out when I get my first job, what do I need to do. I think the more that we can do as employers to help them and use behavioral tools that you know, maybe help them sort of opt into different choices and make that by default that they are doing some things for retirement could be helpful as well. So that you take some of that decision making and the need to know all of the things that you need to know for your future at 22, take some of it off their plate but set them up for success.
- [32:07]
Austin
I love that Answer. And as someone who, you know, I'm 28, but I remember graduating from college, getting my first job, and I'm like, okay, I gotta go start investing to my 401k and I gotta start thinking about my credit and things like this. And unfortunately, none of those things were talked about in my family. And so I remember sitting down with one of our HR managers and I was like, hey, what is a match? And how do I think about what's a 401k? Again? Like, how does this kind of come together? And like, what should I allocate? So to your point, kind of making it more, you know, systemic as it relates to this. Education in the workplace, I think is a really powerful initiative. And man, wouldn't that be great if a lot of These large Fortune 500 companies, you know, these employers of Gen Z and even Gen A over time now, would have some sort of resources, tools, knowledge, information about sort of, you know, setting these kids up for success. I couldn't be a bigger proponent of that.
- [32:50]
Robert
And I think you touched on one of the biggest things in financial literacy that no one talks about. So I'm glad you brought it up. And that is you said, hush, hush. Here's my take on financial literacy and what has been wrong for decades. Not the lack of financial literacy, because we all know that exists. It's the fact that when you feel behind in your financial journey, you're afraid to share it with friends and family. And if you're crushing it in your financial journey, you're afraid to share with friends and family. So you can never have the open conversation because you're either in one group or the other. And if you brag while you're crushing it, they're going to be jealous of you and not learn from you because they will feel they got left out somehow. How? Or you owe them something. And if you're behind in your journey, you're embarrassed to tell people, and that is problematic. There should be a way, a help center, an open forum way that we can get people to talk about it more and more, because I think it would help take the stress out of their daily lives to be able to say, it's okay you didn't get started early enough, or you made some mistakes, or you live beyond your means, but here's how to fix it. And that is one of the waking things that wakes me up every morning, keeps me happy, and makes this so exciting of what Austin and I have built around this podcast is being able to help people en masse and really educate them that it's never too late and there's always a way to fix it. So I'm so glad you brought that up because I think it's a topic no one talks about and it's so important to bring the light.
- [34:31]
Sheena
Oh, I love that. You got to just like keep saying that more and more. And it would be wonderful to have that kind of platform where people get to say because it's never too late, it really is not too late to get on a path, even if we're just really open around that to say like, hey, I'm on the path now or I have to step off the path to deal with these other things, but I know I can get back on that would be so incredible. Thank you for like really elevating that and making that part of your mission.
- [34:59]
Robert
Mission, Absolutely. So as we wrap things up, if our listeners want to dig deeper into financial literacy topics, what is a reliable resource you would want them to go check out among your suite of different platforms and items along the platform that they could take a look at?
- [35:16]
Sheena
Oh, absolutely. I've dropped a bunch of these nuggets throughout our conversation, so let me just distill them now in one list. The first would be be Capital One's Learn and Grow. It's a really great resource that will really give you some of that financial coaching. Basic information. If you're just starting out on this journey and you're just like what are the things that I need to know? That is a good one. Stop shop to just get access to information. If you're an asynchronous learner like me and just want to read things that you can see, that's one place for those another again is Khan Academy's financial literacy course Course really great. If you're the kind of learner who says I like to watch a video and I want to test my skills because I want to be certified that I understand this concept and I can use it, that is great. It's always been a great resource for teachers in the classroom who are bringing those. And one of the reasons we work with Khan also as a resource for this financial literacy is because we know that when students are using it for their work, parents are also learning. And because we wanted to have that multi generational aspect to this, having Khan Academ Academy resource is kind of one of those where if you wanted a parent to sit with a child to learn together, that's a great one and is very accessible to all those audiences. Again, Capital One's credit wise people want to build that credit score, they need information on that. That is my number one source for going to to point people to for their credit. And finally, I will point to a resource that's outside of the Capital One universe but a strong partner for us. There's a group called Saver Life that's S A V E R L I F E Saver Life. It rewards people. It's a nonprofit fintech organization that really brings together the tools and resources to help you gain financial assets while you are making good financial behavior choices. So if you're like, I don't want to just learn this to think about when I need to apply it. I want an incentive along the way to build the financial habits I need to save and invest. SAIFE is one of the really trusted resources and partners that we look to in the nonprofit sector to build those assets.
- [37:27]
Austin
I'll tell you what, I'm over here just writing all this stuff down. I've got Saver Life. I've got this financial literacy, this kind of 16 units with Khan Academy's financial literacy. I can't wait to dig in here. Then you mentioned the Money and Life program before the Learn and Grow. Seems like a lot of like blog articles. You know, you can kind of say I want to explore business credit because I want to see my options. Right? See some cool suggestions there. You guys have got a lot of cool stuff. And again, thank you so much for joining us on this week's episode of the Rich Habits podcast. Everyone definitely go check out this report. This report was eye opening. It's going to be linked in the show notes below. There's going to be a ton of information in there, but what's cool about it, it's not overwhelming. Nice photos, nice pictures. You guys did a really good job of making this report something that people want to continue to turn the page on and read. Paragraph after paragraph, graph after graph. You guys done a really good job on that. So sh. Thank you so much for joining us on this week's episode of the show and I can't wait to have you back.
- [38:17]
Sheena
Awesome. Thanks. Thank you.
- [38:19]
Austin
Now, before we jump into our question and answer portion of the show, let's take a quick moment to hear from this episode sponsors. This episode of the Rich Habits podcast is brought to you by Monarch Money. Speaking from personal experience, I know exactly how stressful and time consuming managing your finances can be. Between building a budget and keeping tabs on your expenses across different credit cards, no wonder people are too afraid to start.
- [38:41]
Robert
Monarch Money makes it simple and easy to connect the dots across all of your spending habits. No matter how many different financial institutions you may use, Monarch Money tracks where your money is and where it's going all in one simple to understand dashboard. From net worth tracking to budgeting, Monarch Money makes it simple.
- [39:02]
Austin
Monarch Money is also customer focused. They're pushing new updates to their app every few weeks and are very active in the R Monarch Money Reddit community. Customers often even submit product suggestions. They vote on new features and can easily view the company's roadmap ahead.
- [39:15]
Robert
After checking out Monarch Money for myself, I now understand why it's a topic operated personal finance app. Right now, listeners of the Rich Habits Podcast will get an extended 30 day free trial when you go to monarchmoney.com habits. That's M O N A R C H M o n e y.com/habits for your extended 30 day free trial. We appreciate them supporting the show and our listeners, so check out monarchmoney.com this.
- [39:45]
Austin
Episode of the Rich Habits Podcast is also brought to you by NEOS Investments. They did just launch a new addition to their high income ETF lineup that provides exposure to the 2,000 small cap stocks that make up the Russell 2000 index. While aiming to provide tax efficient monthly income to investors, their ETFs may be especially interesting for folks looking to generate passive income inside of their investment portfolios.
- [40:09]
Robert
As you've probably heard us mention recently, small cap stocks have historically performed well when rate cuts begin after a period of high interest rates. If you're looking to add passive income focused ETFs to your portfolio, especially as the Federal Reserve Reserve may begin cutting interest rates in the coming months, consider learning more about NEOS ETFs@neos funds.com and as with all investments, investors should carefully consider their investment objectives, risks, charges and expenses of NEOS exchange traded funds before investing. To obtain a prospectus containing this and other important information, Please visit neos funds.com Please read the prospectus carefully before you invest.
- [40:51]
Austin
An Investment in NEOs ETFs involves risk, including possible loss of principal. The equity securities purchased by the funds may involve large price swings and potential for loss. Past performance is no guarantee of future results. All right, let's now jump into our first question coming from Megan. Megan says, hey guys, I've been focusing on improving my finances this year and the Rich Habits Podcast has been instrumental, so thank you so much. I just listened to your episode about buying established businesses and I wonder if I'm ready to acquire1. I'm 33 years old and I work as a flight attendant so my salary is low. But I did receive some stock from my grandpa's company a couple of months ago. I have $8,000 in a high yield savings account, 15,000 in my Roth IRA, 5,000 in my 401k and $67,000 in my bridge account invested into the S&P 500 and some individual stocks. I only have $10,000 of student loans for my debt. I have extra time since my hours are flexible and I'd love more cash flow to travel and begin buying property. I found a program online that teaches you how to acquire businesses for $7,000. Do you think it's worth the investment of $7,000 to get a potential five or seven thousand a month from a business? Or should I try and figure it out on my own and do my own research? My family is also business savvy, so I think I can lean on them for a little bit of guidance. But I'd love your thoughts. My current net worth is $88,000. Should I wait and save up more money or do I jump and buy a business today? Robert, I'll let you kick this one off.
- [42:13]
Robert
Yes, Megan, this is a great question and a dilemma that so many people face at their point years. So I'm going to give you a few different takes on this. First and foremost, you've done a good job getting yourself where you are. At 33 years old, you're not quite at that hundred thousand dollar base that Austin and I talk about on a daily basis, but you are close. So here's a few things to consider. I'd like to see you wait a little bit longer, get across that hundred thousand dollar barrier so that money is working hard for you while you're doing your other thing and still going to school. But also what I would like to see is for you to understand a little bit more and consider what you're getting yourself into by buying this business. Because let's say you go out and buy a business and you take half of what you currently have of $88,000. That really sets you back a really long way but also puts you in harm's way. Because if the business does not produce profits right away, it could eat away at that remaining $44,000. And I see a lot of people that get a good start like you, you have and then they go backwards because they jump into a business too quickly. Now if you were going to buy a small business, maybe an online business where your total output was $20,000 or less, I'd say it's okay to go for it because you might strike a winner, you might have a skill set we don't know about, or you're good at marketing or whatever it may be. But for right now, I think you should wait a little bit longer, keep saving, keep building your base, and then do it later. Because too many people go all in on a business too early and find themselves starting over. Because most small businesses fail in the first few years, even if you buy an established one.
- [43:54]
Austin
I like that perspective a lot, Robert. You know, looking at some of these numbers, it seems like she has about $90,000 invested. Would really love to see that 100,000. Would really like to see 120, 150, 200,000 invested. She's doing great for 33 years old, especially on what she might consider a low sal salary. But I do also just want to encourage you as a flight attendant, if you're looking to make an extra five to seven thousand dollars a month that you could use to go, you know, invest in property or travel and do things like that. I'm not saying not to do those things, but as a flight attendant, I would imagine that you have a little bit of flexibility as it relates to picking up more hours, maybe some overtime. Maybe there's a world where you can, you know, work a lot more, take on a lot more flights, and start making a lot more money. Money for a small season of your life to really build up to that 100, 150, $200,000 of invested capital before you jump into buying a business. Now, Robert, what's your perspective on using a done for you business acquisition thing online? I've not really heard of these before, but it sounds like people are selling them for 5, 7, 10, $15,000. Do you have any perspective on that?
- [44:59]
Robert
Yeah, I do. I actually had a call on one yesterday and they were charging $15,000. And here's what I would look at. To anyone considering using a done for you service. They're not all scams. Some of them can be very helpful as long as you dig in and ask all the right questions and make sure they're actually going to provide you the things that they say. Because unfortunately, a lot of these done for you services will give you access to three loom videos and a couple templates, and that's as far as it goes. So if you find it done for you service, service that's five or seven grand, like you alluded to, Megan, it might be valuable, but just be careful because the last thing you want to do is buy that and not get all the services you need. You need help with the acquiring of the business, the financing of the business, how do you market the business, how do you do the accounting for the business, how do you do the legal. And if you're going to pay $7,000, that course that done for you service should include all of that and it should be for a period of time. Make sure that if you decide to do this that it's not something you get it all in one swoop and you get one phone call and you're on your own. Because then I don't think it's worth $7,000. But if it's something that over six months of acquiring and into running the business, they are there to help you through and through, then I think $7,000 could be okay. But in your instance, having a fan family that is business savvy and having people to call on like Austin and I in the Rich Habits network, I think you could do this on your own with some help from family, asking us some questions in the network and you would be just fine.
- [46:38]
Austin
We're rooting for you, Megan. We just think that you should build your base a little bit more first and then take the leap into buying a business and really going out on your own. Now our next question comes from Taylor. Taylor says. Hey Austin. Robert, I love your show. You've both given me a ton of great advice through these podcast episodes for my own side hustle as well. Now here's a question I've got. I'm getting my master's in economics and I'm going into my last semester. I was planning on taking out a loan of $3,000 to cover my last semester's tuition so I don't have to pull that money out of my investments. However, I'm eligible for a $10,000 direct unsubsidized federal loan with an interest rate at 8%. If I went and took out this $10,000 loan at 8%, I would use the money for two things. I would use it to fund my two side hustles that I haven't had the cash to fund yet. And two, I would pur just voo the S&P 500 because I know it's going to continue to go up over time. Would you guys take out this $10,000 and use it for this stuff as well? If not, what's your explanation? Thanks for your help, Taylor. I'll kick this one off. Robert. Always going to encourage people not to commit loan fraud, right? So probably Not a good idea here. Taylor, student loans should be used to pay tuition and buy books and things like that. Not invest in the S and P and start a side hustle. So do not commit loan fraud. That's not a good idea. People go to jail for stuff like that. But if I were you, I would absolutely take that $3,000 and then finish out your master's in economics. And then I would also. I mean I've got a minor in economics, so maybe figure out what does that job trajectory look like. Right. What's your career now going to be? Call it summer of 2025. How are you going to go from masters in economics with probably tens of thousands of dollars in student loan debt, maybe more to now you're making $120,000 a year and you've got a great career trajectory to make maybe a quarter million throughout your lifetime. So that's the stuff I would be focused on. Of course it's always a great idea to be investing. We always to build their base before you think about paying off those student loans. We know how powerful compound interest can be, especially when it's invested correctly. But Robert, what's your perspective on Taylor's situation?
- [48:41]
Robert
Yeah, Taylor, for me it's a big no. I think what you could do, and I know you're busy with school and you're probably really, really tied down, but there's still nights and weekends I would buckle down. I'd try to get a side hustle going to make some extra money so you can start your side hustle hustles. And instead of going into debt like Austin said and alluded to loan fraud, do it right, keep doing what you're doing in school. Find a way to make an extra thousand dollars a month, $500 a month to put towards your side hustles and then move forward from there. You can always work for someone else as a side hustle for now till you can build your own. Because the last thing I want to do is see you go into high interest debt or worse, get into into trouble to get started. I love the sentiment, I love your thinking process. But you have to do it right because you don't want to start off on the wrong foot. And I can tell you that from experience. When I was going through college and I was trying to start my own thing, my father said he would help. He stopped helping and I did what everyone did back then that didn't know any better because we didn't have financial literacy and people like Austin and I out there to help us I ran up my credit cards to get started on my vending route and it ended up working out for me. But most people, it won't work out. So just be careful, do it right, and take your time.
- [50:00]
Austin
And additionally to your point, Robert, we made a whole episode dedicated to, you know, side hustle ideas for busy people, including parents. Taylor, you're definitely busy, you're in school, and here are four side hustle ideas that you could implement as a student. So there's a ton of things that we suggest that you do. Loan fraud is not one of them. So go listen to that podcast episode. There's a ton of different ideas in there and we're rooting for you. Graduate with that 4.0. We know you're going to graduate with. Continue to invest before you pay off your student loans, and we're rooting for you now. Our last question comes from Lamecia. Lamisha says, Dear Robert and Austin, I hope this message finds you well. I understand you both receive a high volume of inquiries, but I would greatly appreciate your insights on a couple financial questions. First, I have a portion of my retirement savings still invested in a pension from a previous employer, and it's currently earning 4% per year. While this isn't a significant annual return, I do expect it to grow steadily over time until I reach retirement. The balance of this is approximately $32,000, and I'll also receive a monthly pension payment when I retire. My question is whether I should leave this money in the pension plan to collect both the interest and the future payments, or if it would be smarter for me to then transfer the money out and put it into a Roth ira. Thank you in advance for answering my question, Lamisha. Robert, you want to take this one?
- [51:17]
Robert
Yeah, I'd love to. I think you know, and you and I agree on this 99% of the time. Assuming Lamecia's age, based on her picture, I think she is young enough that it makes sense to not kick the can down the road, get that money out and transfer it into the Roth IRA, because at the end of the day, 4%, although is nothing, it is still drastically underperforming what we believe the markets will do over the next 10, 15, 20 years. And so for me, me, it's a big yes. Transfer the money, get the Roth IRA going, pay the small tax bill now so you don't have to pay the large one later, and you'll put yourself in a much better situation for retirement growth this way. Because at the end of the day in the Roth component, you're going to have autonomy over what you invest in and you're going to outperform that 4% year over year, that's for sure. So that's what I would do. And I think that's the best course, course of action.
- [52:12]
Austin
You know, Robert, I'm doing some quick math over here on my calculator and assuming Lamisha's 40 years old, which I think she's much younger than that according to her Instagram photo. But let's assume she's 40 and she wants to keep this money invested for the next 30 years in her Roth IRA until she's 70. Right. And she invests in the S P 500, the index funds we talk about, and she does the 10 12% per year annual return over a long period of time, she would have, by not even adding any more money, this $32,000 would turn into $1.1 million over that 30 year period of time. That's amazing. Now let's instead assume that she keeps it at this 4% annual return. This 32,000 would only turn into $105,000 in retirement. So you're really talking about $1 million discrepancy here, Lamecia. So if you want an extra potential $1 million in retirement, assuming the S and P continues to do what it's done for the last 90 years, the next 30 years, then flipping this money from out of your pension and into a Roth IRA and investing it correctly. Correctly is really going to move the needle for you. But to Robert's point, what's also really important here to consider is the tax implications. Right. We all know that when you go and you sort of go from this traditional to a Roth, you have to pay taxes on that conversion. So be prepared to pay income taxes on this $32,000. I'm not a tax professional and neither is Robert. So definitely go get with a tax professional who's going to be able to lay out for you what that tax bill might be going to look like and maybe even work with you as to how to lower that tax bill in the future. Your head's in the right place, Lamecia. You've got a great start to your long term retirement goals and we think you're going to do just great. Everyone, thank you so much for tuning in to this week's episode of the Rich Habits podcast. We hope you learned something from having Sheena joining us from Capital One. We love connecting you all with these industry experts. Right. The people who are doing the research, boots on the ground, they know what's going on behind the scenes and they're actually trying to make an impact in the industry. We love what Capital One's doing with their research and we think this episode hopefully taught you something and maybe even share it with a friend who might not be all the way there when it comes to financial literacy. We talked about a ton of resources as to how anyone can begin to learn more about their finances and we hope this episode helps.
- [54:25]
Robert
I think the key word for me in your takeaway, Austin, is resources. That is what we aim to bring to you each and every week. Not only just the education, but the newest, latest and greatest resources from all of these amazing platforms that we work with on a weekly basis. So that is one of the best things I think we offer is up to date information because you always hear us saying that personal finance is personal, but also that you have to stay on top of your finances because as I always say, you have to make your money work as hard for you as you work to get it. And that is why these resources and all of these people that we bring on to present to you all of these new fun tools that they have and opportunities that are out there to help all of you grow your personal wealth and reach financial freedom as soon as possible. So thank you all for joining each and every week. We appreciate you more than you know and if you know someone that might need some help in their own personal journey, share the podcast with them. And we appreciate those five star reviews. Keep them coming, get it out there, share with your friends, your neighbors or whoever because everyone can use a little extra help in their financial journeys.
- [55:37]
Austin
Couldn't have said it better myself, Robert. With that being said, thanks everyone and have a great start to your week.