Goldman Sachs (GS) entered the consumer credit market with a splash, first with its successful run at consumer credit under the Marcus brand, and now with Apple Card. As the firm sheds its exclusive Wall Street image, and the baggage associated with the name “Gordon Gekko.” they now provide a view on consumer financial literacy. Coincidently, President Trump dubbed April 2019 as National Financial Capability Month in this Whitehouse message.
The GS message on financial literacy is clear: “A Third of Americans Would Rather Change a Diaper Than Deal With Their Finances..”
- April is Financial Literacy Month, but according to a recent survey from Marcus by Goldman Sachs®1, some Americans would rather do almost anything than deal with their finances, including washing the dishes (51 percent), going to the doctor (36 percent) and giving up dessert (31 percent).
Having raised three kids, I can vouch for the fact that changing diapers quickly moves from being a marvel of life to messy hands, but you can’t fight nature and just do what has to be done. It is not too clear why washing the dishes garners a 51% preference, and we all can surely pass on dessert.
GS does offer the standard advice credit literacy-sensitive firms offered in the past, albeit from a privileged point of view:
- Download a Personal Financial Management App:Consider a free personal financial management app like Clarity Money, which monitors recurring expenses and helps users cancel unwanted subscriptions.
- Review Your Credit Score:Knowing your credit score is an essential benchmark and improving it can help long-term financial planning.
- Create Your Emergency Fund:Know how much to set aside for unplanned life moments, to help protect you from surprise costs and their impact on your financial future.
- Check Your Retirement Funds:Familiarize yourself with your company’s 401K offering. See if they have a matching program and check what your contributions are to your 401K.
- Open a High-Yield Online Savings Account:Learn the annual percentage yield (APY) on your savings account and then compare your rate to those offered by other banks to see how much more you could be earning.
Now that GS is in the market with the major US credit cards issuers, such as American Express, Bank of America, Capital One, Chase, Citi, Discover, and Wells, they will need to understand that the US mass market is not equally endowed. Sure Goldman Sachs’ Clarity Money is interesting, and even Google suggests that Marcus requires a 660+ FICO score, though it does not appear that Marcus provides a free score as most credit card issuers provide.
Creating emergency funds, building retirement accounts and opening high-yield online savings are great ideas, but the reality is that people in the United States are not good savers. This link at the Federal Reserve Bank in St. Louis indicates that while there has been a slight increase in savings, personal savings is only 7.5% of income.
There is no doubt that GS will need to get in synch with the American Consumer household. The Bureau of Labor Statistics reports an average of $73,573 in income, with housing absorbing $19,984, food consuming $7,729, Healthcare requiring $4,928, with insurance and pension funding taking $6,771.
This will be essential as the Apple Card meets the market. With a promise of no-fee and 2% in rewards, getting beneath the FICO score band of 720 will take more than financial literacy. Barclays tried to fill the promise but is now in retreat.
And, yes, of course, good housekeeping requires understanding personal finance, but the industry awaits GS entering the mass market, with all the blood, sweat, and tears of the household budget to make the new Apple Card work for the masses.
Diapers are a breeze, and you quickly learn how to make the change in low lighting. Budgeting a household can be messy.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
