US digital financial literacy increases with age, according to research released by the Capital One Insights Center. It notes that 74% of consumers over 65 rank highly on both digital and financial literacy. This compares to only 28% of those ages 18-24. The Capital One report defines digital literacy as understanding a combination of basic financial knowledge and being able to protect oneself online from phishing attacks and other financial scams.
Consumers of all ages continue to struggle with financial literacy says Capital One. It reports that more than 40% of consumers lacking basic financial knowledge.
“From paying bills to checking bank balances, people are managing their finances online. This makes digital financial literacy skills critical for consumers,” said Shena Ashley, President, Capital One Insights Center and Vice President, Community Impact and Investment.
“Even though an overwhelming majority of Americans are regularly banking online, too many still lack basic financial knowledge and skills. Capital One is committed to working with stakeholders in the public and private sector to identify and advance solutions to address knowledge gaps.”
Capital One Insights Center report: Banking in the digital age key findings
Nearly 86% of Americans know how to protect themselves and their personal information online. However, more than 40% of consumers lack basic financial knowledge. Examples include how to manage debt or build credit. Previous research has shown that financial literacy improves financial well-being.
Despite high digital literacy scores, lower financial literacy means only 55% of consumers are digitally financially literate. These digitally financially literate consumers understand a combination of basic financial knowledge. And they can protect themselves online from phishing attacks and other financial scams.
Digital financial literacy increases with age. Older consumers ranked higher in both digital and financial literacy. Of the 65+ population, 74% rank highly on both digital and financial literacy. This is nearly three times higher than the 18–24-year-old population.
Consumers prefer to bank online
Even among consumers who scored low on both digital and financial literacy, 45% said they prefer managing their finances through a mobile app. 19% prefer using a website, and only 9% prefer going to a bank branch.
In addition, consumers are banking online regularly. 70% of US households report being enrolled in digital banking for some or all of their accounts. Among consumers who are enrolled in digital banking, 95% said they bank online “often” or “occasionally.”
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Many US states have moved to mandate that high school students take financial literacy classes before graduation. However, most curricula do not include courses for financial education that focuses on online and mobile money management. Capital One says it is critical to invest in digital financial education to help young adults navigate the digital world.
“Financial literacy is key to owning our financial lives and futures,” said Adam Davis, VP, Financial Health, Inclusion, and Liquidity. “But consumers increasingly say they prefer managing their finances online. So the question we should be asking is how can we help them master financial literacy in a digital environment.”