Ensure your clients know the basics.
Differentiate yourself by imparting a little wisdom.
Purchasing a home often marks the biggest financial commitment most Americans will take on. But, despite rising homeownership rates, personal financial knowledge across the U.S. is undeniably lacking. In fact, the measure of financial literacy fell a staggering 19% over the course of the last decade.
As a result, finance professionals, including MLOs, owe it to their clientele to provide helpful resources, transparent information, and, sometimes, a little educational content.
Demystifying and explaining personal finance basics among your borrowers can help empower and encourage them, all while differentiating you from the competition.
Personal Financial Knowledge Basics
As a home finance professional, it can be easy to find yourself wrapped up in more complex problems while forgetting to simplify certain terms and concepts. To be effective in your role, it’s important to think at a high-level while simultaneously communicating some often-confusing financial tenets to your clients. After all, the very best teachers can explain complex ideas in simple ways!
To the layman, remember that personal financial knowledge, or financial literacy, typically includes a solid grasp of finance management, budgeting, and investing. While your clients don’t necessarily need the ability to crunch numbers quite like you do, they should be able to set and achieve savings goals, create a household budget, and, if they’re serious about buying a home, understand the basics of an investment.
You should also remember, though, that personal financial knowledge is certainly not a given.
Common Gaps in Personal Financial Knowledge
Unfortunately, there are many significant gaps when it comes to the financial knowledge of the average American.
For example, it’s been found that only 16% of U.S. high schoolers are required to take a personal finance course, only five states have any kind of related academic requirement, and less than 9% of students in the forty-five others receive education on personal finances.
Further, more than half of all Americans would be unable to cover a $1,000 emergency without the help of their savings accounts, many student loan borrowers may find themselves unprepared if and when their payments resume, and one-third of borrowers say that inflation is their largest stressor this year.
Essentially, many of your clients could benefit greatly from your expertise.
How Borrowers Benefit from Personal Financial Knowledge
In 2020, Freddie Mac found that homeowners tend to have stronger financial skills than the average person. What’s more, Americans who take advantage of formal financial services, including bank accounts, credit cards, and loan products, tend to enjoy higher degrees of financial knowledge. This benefit is measurable regardless of the responder’s gender or income, two factors which negatively impacted the degree of financial knowledge in other regards.
Essentially, sharing financial information can help your clients become more confident, better equipped, and more knowledgeable all around.
How MLOs Can Help Impart Personal Financial Knowledge
While finances can seem intimidating for many Americans, taking the time to explain concepts, offer resources, and answer questions will go a long way in demystifying things.
Whether you’re a brand-new MLO or a seasoned pro, perhaps consider:
Take-away materials that borrowers can reference on their own time.
Evergreen content, whether written or via video, that you can email or text to current and potential clients.
Timely news updates on your social media pages with your expert commentary that might apply to clientele.
A list of local contacts, vetted courses, or other resources that you can suggest to potential borrowers.
A dedicated Q-and-A session at the end of each meeting or call, to clarify any sticking points.
At the end of the day, a little effort goes a long way in boosting personal financial knowledge and making a difference. As an industry expert, never be afraid to share your insight and improve the homebuying process for the average borrower. Your future (more knowledgeable) clients will thank you!
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