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There is a strong correlation between financial knowledge and household wealth. Technological advancement has brought forth numerous free tools that can be used for fiscal management, but this advancement doesn’t necessarily translate into better knowledge. The reason is that enhanced technology has resulted in diverse financial assets, which requires obtaining expert knowledge.
A study reveals that an alarming number of people are unaware of new financial products and cannot grasp key investment indicators such as inflation and risk diversification. Therefore, getting appropriate knowledge is paramount for gaining financial independence in this regard.
Pattern Detection of Fiscal Illiteracy
Since the recession, a majority of the U.S. population is on the verge of financial insecurity. Retirement savings are not sufficient and many senior individuals have to look at alternate options.
A Health and Retirement study confirms that planning and fiscal literacy among older individuals is a major deterrence to economic independence and similar patterns have been detected in younger adults. The study points out that a portion of the population cannot do simple interest rate computations despite an array of free digital tools at their disposal.
With the arrival of virtualization, it was predicted that ‘do-it-yourself’ finance would become popular and aid in financial decision making. However, it has since been observed that their efficiency is not enough on its own. There is still a great need for market acumen.
Many options in credit, mortgage and investments are trickier to navigate. Virtualization populists assume the notion that people with access to technology can gain financial independence, irrespective of their knowledge state, but this isn’t the case in most instances.
The digital aspect of fiscal success is a dependent variable, and it depends heavily on expert fiscal advice or market acumen. Without this acumen, the tools are merely accessible to those who have fiscal knowledge. Studies conducted by financial academic institutes have linked experience with growing financial autonomy.
The impact of acumen
Stock market experts are the usual go-to professionals when it comes to people needing financial advice. In this case, using digital tools can result in a symbiotic relationship. One stakeholder (the experts) benefits the consumer by providing them with acute market advice. Through this approach, risk diversification and asset management are addressed with increased financial knowledge on the part of the consumers.
The role of advisors is important because of the ‘biases’ of the consumer. The common user tends to deviate towards those investment options that are advertised to them. Financial advice, on the other hand, is focused on a simple principle of mutual growth. By analyzing the consumer’s fiscal conditions, ideal scenarios are projected. The end result provides the user with better fiscal knowledge as well.
There are hordes of information tools available that are key to gaining financial independence. However, their optimal use can only be ensured when they are coupled with intelligible market knowledge. The case provided above gives evidence to this predicament, so by generating bias free knowledge, decision making is not only improved; it also becomes profitable.