How the Biggest Hack in History Changes the Nature of Financial Literacy

The ransomware virus that landed in 150 countries last week, and was called the biggest cyberattack in history, points up an aspect of financial literacy that often flies under the radar: Victims of financial fraud tend to be among the most financially savvy.

That was a startling finding in a decade-old study from the NASD Investor Education Foundation, now called Finra. Victims of financial scams scored higher than non-victims on eight financial literacy questions. They were also better educated in a classic sense.

Smart people dumb about money? How can that be? One answer is found in the psychological make-up of financially astute fraud victims. As a group, they tend to be more optimistic about the future and have more confidence in their ability to make wise decisions. Think dentist or doctor, both reputedly bad investors. Their confidence sets them up for a slick sales pitch. It might not even be about people being dumb about money. Sometimes people can be a little careless, and fraudsters can exploit that. In the process of cashing checks, people might forget an unused check on the table or leave a blank in the check, allowing fraudsters to misappropriate the check. However, banks nowadays tend to have a check cashing fraud prevention department that can help reduce these types of frauds.

Of course, investment scams are different than a hacker locking up your digital information and demanding a ransom-or a hacker pulling your credit card data from a breach at, say, Target, where you just charged a new set of dishes.

But not significantly so. You can protect yourself from viruses and hackers. Alter your password. To prevent data leaks, you could also use mobile app security for your smartphone phones and antivirus software for laptops. Don’t click on suspicious email attachments. Smart people know this too, but ignore the safeguards anyway.

These are new-age issues. It’s safe to assume that “ransomware” and “cyberattack” are not in the vocabulary of many past age 65. We need new-age solutions.

Maybe we should start by measuring financial literacy against how well individuals understand modern financial scams, in addition to their understanding of basics like budgets, credit, saving and investing. After all, if you can’t say no to a slick sales pitch it doesn’t matter how much you know about compound returns. An emptied bank account doesn’t grow.

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How Fintech Changes the Nature of Financial Education

Saving Through Apps isn’t Enough

What Young People Can Learn from Found Money

The King of Money Apps can Teach Financial Educators

How Venmo is Changing the Rules in Financial Education

When We Have Chatbots will we Still Need Financial Education?

Posted in Gadgets & Apps on May, 2017