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

By Dan Kadlec

May 17, 2017

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.

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 that different. You can guard against viruses and hackers. Change your password. 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.

More on technology and money:

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