How Smartphones May Complicate, not Simplify, Your Financial Life

Smartphones have become a pipeline to our financial information, from daily transactions and account balances to 401(k) contributions and stock trades. the Federal Reserve reports that 52% of adult smartphone owners use mobile banking services. Just take a look at the Smartphone Statistics in 2022 to see the impact that smartphones have on those who use them in their day-to-day lives, and what that means as a phone user.

But while technology has given us insta-finance and the ability spend and save money without having to interact with another human being, it has also triggered a new set of questions: is technology necessarily a good thing when it comes to making financial decisions? And do apps advance or impair financial literacy?

A pilot study conducted in March by Shlomo Benartzi, co-director of UCLA’s Behavioral Decision Making Group at the Anderson School of Management and the author of The Smarter Screen, and John Payne of Duke University, found that people did significantly worse on a financial literacy test when they took it on a smartphone as compared to those who used pen and paper. This suggests a heightened level of distraction or carelessness when dealing with money issues on a mobile phone and points up a hazard of financial tech.

Many studies confirm that smartphones fragment our attention and decrease our understanding of the content there. Taken with the Benartzi study, it suggests we should be careful about making financial decisions on mobile devices. “Because smartphones can encourage us to tap and swipe quickly, we might neglect the long-term consequences of our behavior,” Benartzi wrote in The New York Times.

While the ability to act immediately on a smartphone may lessen anxieties in the short run–say, by selling a stock when the markets look shakey–this ability may not be good for one’s long-term financial future. “This research has led me to avoid making any major financial decisions on my smartphone, whether it’s rebalancing my 401k account or making an offer on a house,” Benartzi wrote. “I’m no Luddite, but I don’t think mobile devices are the best medium for making major money decisions.”

Posted in Bank of Dad, Gadgets & Apps, Latest Research on October, 2016