Heidi Johnson Helps Older, Low-Income People Manage Their Money
By Richard Eisenberg, Next Avenue
So many research studies about Americans’ personal finances focus on affluent adults and their retirement savings. But Heidi Johnson, director of behavioral economics for the nonprofit Financial Health Network, has put a spotlight on the money challenges of low- and moderate-income people 50 and older. More specifically: how financial institutions and personal finance apps often aren’t serving them very well.
Johnson, who’s based in Washington, D.C., spearheaded the Financial Health Network’s “Fintech Over 50: Designing for Low-to Moderate-Income Older Adults” 2020 report, sponsored by the AARP Foundation in collaboration with Chase. She and her team interviewed 90 people to learn about their money challenges and how they thought technology could better serve them.
Johnson’s work at the Financial Health Network — formerly known as Center for Financial Services Innovation — is a logical extension of what she did previously as a researcher at the federal Consumer Financial Protection Bureau.
“Only seventeen percent of low- to moderate-income adults ages fifty and older are financially healthy.”
And for the past 12 years, on the side, Johnson has been a volunteer tax preparer. “That’s been a really fun experience for me,” Johnson said. “It’s definitely kind of geeky getting into the tax code. But when you think about the barriers for so many people to file their taxes every year accurately, I think it’s really important.”
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Next Avenue: How did you first get interested in the personal finances of people over 50, and then in particular, low- and moderate-income people in that age group?
The AARP Foundation had sponsored an opportunity for us to dig into our national nationally representative survey findings, the U.S. Financial Health Pulse, and look at people who are 50 and older and who have low- and moderate incomes. And it was really, really illuminating to see the variety of financial health challenges they were facing.
So, it was a natural next step to explore what we could do to facilitate that.
Your report was called “Fintech Over 50.” Why don’t you explain what Fintech means?
We’re thinking about the financial technology companies that are providing services outside of maybe your typical bank or credit union. We’re also bringing in banks and credit unions under that umbrella because they also provide so many digital financial services.
You can interact with any financial institution online. And so, our focus in this research was on that online mobile, really tech-enabled engagement with financial services.
You discovered some financial health issues specifically for this group of people who are over fifty and low- and moderate-income. Tell us a little bit them?
We’ve found that only seventeen percent of low- to moderate-income adults ages fifty and older are financially healthy. That is far too low a number. And there are a wide variety of challenges that feed into that and drive those challenges.
One is insufficient savings, even short-term savings. So many people don’t even have the savings that can help them in the next few months as unexpected expenses arise.
“They really were much savvier than they gave themselves credit for.”
Another is unmanageable debt. Surprisingly, many older adults still hold student loan debt or many other kinds of debt that are getting in the way of them being able to feel comfortable managing their finances.
A third one is inadequate protection from medical shocks. They can be so costly and devastating.
Another is the inability to fully retire. For too many people, retirement isn’t playing out the way they expected it to and they’re finding that they need to continue working or finding ways to boost their income far beyond when they’d expected.
And then the last component we saw as a challenge is family obligations. Often family can be a really strong support of people’s financial health. But sometimes there may be others in their family who need support from an older adult who has built up some assets and might be well-equipped to help them.
Your team spoke with a lot of these people. What did they say about how they felt about finances and technology?
We did in-depth interviews with over ninety participants.
People had their ways of going about managing cash flow and how they thought about savings. They’d built up quite a bit of experience with all of that naturally. And so, in thinking about their finances, there wasn’t necessarily a sense of uncertainty or trepidation, but more trying to manage with what they had and having systems in place to do that.
And had they had much experience with using mobile banking or apps or websites from banks and financial institutions?
AARP has found that even though many older adults have smartphones and access to a lot of different sources of technology they use frequently, they’re not using it as often to manage their money. Only about a third of them with smartphones actually used that technology for their finances in the previous month.
So, that gap was really the focus of our research — investigating the question of what drives that gap between comfort with and usage of technology and applying it to managing their finances.
What could banks and other financial institutions do to be more useful for them?
We identified four main opportunities that fintechs or banks or credit unions could be leveraging to support people.
The first one is to empower your users. Many of the people we spoke with felt like technology was kind of being forced on them.
The second is to put them in control. You know, fintech is not that appealing for someone who is very worried about the money coming in and out of their accounts. And so, making sure that they can be in control of their money is really key.
The third aspect is about [age] stigmas. It was striking how many of the people we talked to described themselves as ‘I’m not a tech person’ or ‘I’m not very tech savvy.’ But what we witnessed through the data collection and our interactions with the participants was that many of them were using smartphones. We saw them interacting with home assistants like Alexa. And they really were much savvier than they gave themselves credit for. I think they have just internalized these negative stereotypes that simply aren’t true.
The last aspect is to foster connections. We learned that older adults really value their connections to family, to friends and their communities. And if you don’t see fintech as an enabler of that, it’s not going to be nearly as appealing. So, trying to bridge that divide, I think, will be really helpful.
It sounds like a lot of these things aren’t that hard for fintech to do. Why aren’t they?
I think sometimes there’s a misperception that older adults are looking for very targeted products that are made just for them. And that’s not always the case, given the financial health challenges that they’re facing.
A lot of those are shared by all of us really, in terms of short-term savings and managing debt. And so, the same solutions that can work in a mass market context also are valuable for older adults and they’re interested in them. It’s a matter of just incorporating their needs into existing products.
Your survey found that some people were annoyed, sometimes a little angry, when they saw products and services that seemed like they were made only for older people. They just wanted to be treated like everybody else, right?
That’s right. I mean, isn’t that what we all want? And with a mass market, personal financial management product, you’re going to have a diverse user base and that’s a fantastic thing that all of the companies want.
So, older adults are just one of the many potential user groups that should be included in user testing. And thought about in terms of the design of the product and what they need to make it successful.
How has the pandemic changed the use of financial apps and services for older adults?
A lot of financial institutions are reporting accelerated adoption. They’re seeing so many more people downloading their mobile banking apps, so much more online engagement because it’s not as safe to conduct those everyday financial transactions in person.
So, it’s a big opportunity, I think, to incorporate older users into those platforms.
But I think the key is really going to be what happens later when we can go back to all of our in-person, former ways of doing things. Are people going to stick with their online financial management systems or go back to the in-person ones?
I think that will be revealed by whether or not financial institutions step up to make it a positive experience for people.
If you could change one thing about aging in America, what would it be?
I would work to reduce the financial health challenges older adults face as they near retirement. Our research finds that these individuals face inadequate protection from medical shocks, unmanageable debt, insufficient short-term savings,and family obligations that mean too many are forced to put off retirement.
How has the Covid-19 pandemic changed your perspective on aging?
The pandemic has highlighted the technological barriers older adults encounter. Our research shows that older adults often prefer to manage their finances — and other everyday tasks— in-person. With wide closures and the need to adapt technology for basic things like grocery shopping and banking, older adults are experiencing an inordinate burden.