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Sunday, April 21, 2024

Being smart in a digital society

How to be smart in a digital society

09.28.2023

Americans owe over $1.03 trillion¹ in credit card debt. While debt continues to mount, we navigate a landscape drastically different from previous generations – welcome to the digital society.

Here, money moves at the click of a button, but so do scams, frauds, and financial exploitation. Yes, the convenience is wonderful, but there are potential pitfalls as well.

So, how can you keep up, safeguard your assets, and possibly turn this complexity to your advantage? By mastering budgeting skills and understanding the nuances of online money management. Whether it's password protection for your accounts, the efficient monitoring of finances, or understanding the world of digital payments, this article will help guide you through making informed decisions. Read on and uncover the dynamics of navigating a digital society.

What is a digital society?

A digital society is one where technology and the internet are deeply woven into the fabric of daily life. We're talking about more than just having smartphones and laptops; it's about how these tools change the way we interact, learn, work, and even how we manage our money.

In a digital society, financial literacy isn't just a nice-to-have skill; it's essential.

You see, in a world where transactions can happen with a click, understanding the implications is crucial. Financial education is a key part of navigating this digital landscape safely.

Let's say you want to invest in the stock market. Nowadays, in a digital society, you can do it from an app.

But how do you know it's a smart move? How do you know the risks involved? That's where financial literacy comes in.

The internet provides a wealth of information for those willing to seek it. Want to know how to budget? There's an app for that. Need to understand the basics of a mortgage before buying a home? Countless resources are available at your fingertips.

The digital society has made it easier than ever to gain financial education, but it's up to the individual to take advantage of these opportunities.

Yet, this digital access to financial tools and information can be a double-edged sword. On one hand, it democratizes access to opportunities that were once only available to a few. Almost anyone can start investing, budgeting, or even an online business with minimal upfront costs.

On the other hand, the easy access can lead to impulsive decisions. Buying stocks or cryptocurrencies without proper knowledge could end up being a costly mistake. That's why financial literacy is such a vital skill to have in this digital age.

What factors should I consider in online money management?

Managing your money online comes with its own set of challenges and opportunities. This section will highlight some of the ways you can help keep your financial life secure and efficient. From understanding the importance of a robust password to recognizing the subtle signs of account takeovers, we've got you covered.

Password protection: Your first line of defense

When it comes to managing your money online², one of the most straightforward yet effective things you can do is to have a strong password. It sounds simple, but you'd be surprised how many people ignore this basic step.

Picking an easy-to-remember password like "password123" might seem convenient at the moment, but it's an open invitation for an account takeover. This is where someone gains unauthorized access to your account and can make transactions without your knowledge.

The power of strong passwords

Choosing a strong password is a must. When you opt for something that combines upper and lower case letters, numbers, and special characters, you make it harder for anyone to guess it.

But why stop at just a password? You can take it up a notch by using two or more steps to verify your identity, commonly known as multi-factor authentication.

For example, after entering your password, you might get a text with a code you have to enter. This adds an extra layer of security because even if someone figures out your password, they would also need access to your phone to get in.

Different ways to verify your identity

While multi-factor authentication adds extra security, there are even more ways to verify it's really you trying to access your account. Some services offer voice recognition³ as an extra step.

Instead of entering a code from your phone, you speak a phrase, and the system checks if it matches your voice pattern on file. Sure, it might feel a bit like a spy movie, but the added security is well worth it.

Tools to keep your passwords safe

Remembering complex passwords for multiple accounts can be a headache. That's where password managers come into play. These handy tools remember your passwords for you and can even generate new, strong passwords at the click of a button.

Some of these password managers can integrate with your browser, filling in your login details automatically so you don't have to remember them. But be cautious; always pick a reputable password manager.

Keep an eye out for account takeover signs

Not all signs of an account takeover are obvious. Always monitor your accounts for suspicious activity. If you see unfamiliar transactions, or if you're getting emails about password changes you didn't make, those are red flags that someone might have taken over your account.

Act fast – change your password, notify your bank or service provider, and take any other actions they recommend.

Monitoring financial accounts

Monitoring your financial accounts is like being the lifeguard of your own financial pool. You have to keep an eye out for anything suspicious. Just as a lifeguard spots potential trouble, you need to be on the lookout for odd transactions or changes in your accounts that you didn't make.

Why? Because being attentive can be the difference between spotting a small leak in your finances and letting it turn into a flood of problems.

Why monitoring matters in online money management

Keeping track of all your financial accounts might sound like a chore, but it's an essential part of online money management. First, it lets you see where your money is going.

Are you spending too much on dining out or buying clothes? You'll never know unless you pay attention to your accounts. This awareness allows you to make changes that can boost your financial health.

Second, you'll be the first to know if something fishy is happening. What if someone gains unauthorized access to your account and starts making transactions?

The sooner you spot it, the faster you can stop it. And trust us, you don't want to wait until your bank calls to tell you that you've been a victim of fraud. By then, the damage could be extensive.

Tools for efficient monitoring

But how do you keep an eye on everything without it eating up all your time? You can start by using tools that let you manage all your accounts in one place. These tools make it easier to check in and ensure everything is on track.

This isn't just about avoiding fraud; it's also about making sure you're not missing out on opportunities to save or invest. If you see you have extra cash in your checking account, you can move it to a savings or investment account where it can grow.

The power of alerts

Another crucial step is setting up alerts. Most financial institutions offer notifications for different types of transactions.

Want to know if a large amount gets withdrawn from your account? There's an alert for that. These notifications act as an extra pair of eyes, keeping watch even when you're busy with other things.

Digital payments

We've come a long way from the days of cash and checks. Nowadays, digital payments have become a cornerstone of how we manage our money.

The appeal is easy to see: they're fast, convenient, and offer an extra layer of security that traditional methods might lack. But as with any advancement, understanding your options can be crucial to making progress.

Let's start with peer-to-peer payment technologies, commonly known as P2P. These are apps like Venmo and Cash App that allow you to send money directly to someone else, usually via your smartphone. It's the digital equivalent of handing over cash, without the need to physically be in the same place.

Quick tip? Always double-check the recipient's details before hitting 'send.' One wrong digit can mean your money goes to the wrong person, and it might not be easy to get it back.

Another popular form of digital payment is "Buy Now, Pay Later" or BNPL. These services, such as Afterpay or Klarna, allow you to break down a purchase into smaller, more manageable payments.

This can be a lifesaver for bigger purchases you need to make but can't afford all at once. However, be mindful of interest rates and terms. It's easy to get sucked into buying more than you can afford.

Besides P2P and BNPL, most people are familiar with online payment platforms like PayPal or even digital wallets like Apple Pay. These are super handy for online shopping or even in-store purchases and usually offer high levels of security. 

Our advice? Make sure to review your transactions regularly and keep your apps updated for the best security features.

Financial exploitation

Financial exploitation is a serious issue that often goes unnoticed, especially among older adults. These vulnerable individuals can become easy targets for scammers or even family members looking to take advantage of them. This is a topic that we can't ignore, especially when it concerns the well-being of our elders.

Let's start with some of the warning signs. One big red flag is a sudden change in banking habits. If an older adult starts making frequent or large withdrawals, it might be a signal that something is not right. Often, scammers or manipulative individuals gain the trust of older adults and then use that trust to access their finances.

Another warning sign is isolation. Scammers aim to separate their targets from their support systems, making it easier to exploit them. So, if an older family member suddenly becomes withdrawn or stops attending social events they used to enjoy, that's a concern.

Unexplained or unpaid bills are another sign that something may be wrong. It may seem like a minor thing, but when older adults can't account for their spending or start to miss payments, it could indicate that someone is mismanaging their money or worse, stealing from them.

Legal documents can also become a tool for exploitation. If a new power of attorney suddenly appears, or if there are rapid changes to a will, this should raise alarms. Remember, many older adults might not fully understand the documents they are signing, making it easier for someone to exploit them.

So what can you do? Stay connected with the older adults in your life. Regular check-ins can go a long way in keeping them safe. Also, encourage them to consult with trusted individuals before making significant financial decisions. Knowledge is power, and by knowing the warning signs, we can all play a part in stopping financial exploitation.

Work toward achieving financial freedom with savvy budgeting skills

The tools and skills to maneuver safely and profitably in a digital society are within your reach. This article provided you with key insights on budgeting skills, from protecting your financial assets online to staying alert for signs of financial exploitation. So why not apply these learnings for a better financial future?

1 Federal Reserve Bank of New York, "Total Household Debt Reaches $17.06 Trillion in Q2 2023; Credit Card Debt Exceeds $1 Trillion," August 2023.

2 United States Department of Labor, "Online Security Tips."

3 Ars Technica, "Microsoft's new AI can simulate anyone's voice with 3 seconds of audio," September 2023.

4 ABC17, "How to be 'money smart' in a digital world," February 2020.

5 U.S. Department of Justice, "Red Flags of Elder Abuse."

This content is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Advisory services are provided for a fee by Empower Advisory Group, LLC (“EAG”). EAG is a registered investment adviser with the Securities and Exchange Commission (“SEC”) and subsidiary of Empower Annuity Insurance Company of America. Registration does not imply a certain level of skill or training. Investing involves risk. Past performance is not indicative of future returns. You may lose money. All visuals are illustrative only. Actors are not EAG clients.

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The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. No part of this blog, nor the links contained therein is a solicitation or offer to sell securities. Compensation for freelance contributions not to exceed $1,250. Third-party data is obtained from sources believed to be reliable; however, Empower cannot guarantee the accuracy, timeliness, completeness or fitness of this data for any particular purpose. Third-party links are provided solely as a convenience and do not imply an affiliation, endorsement or approval by Empower of the contents on such third-party websites. 

Certain sections of this blog may contain forward-looking statements that are based on our reasonable expectations, estimates, projections and assumptions. Past performance is not a guarantee of future return, nor is it indicative of future performance. Investing involves risk. The value of your investment will fluctuate and you may lose money. 

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements. 

Advisory services are provided for a fee by Empower Advisory Group, LLC (“EAG”). EAG is a registered investment adviser with the Securities and Exchange Commission (“SEC”) and subsidiary of Empower Annuity Insurance Company of America. Registration does not imply a certain level of skill or training.