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Exploring Causes, Effects, and Solutions to Financial Illiteracy and Exclusion among Minority Demographic Groups

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  • Abhinav Shanbhag
Abstract
Americans across demographic groups tend to have low financial literacy, with low-income people and minorities at highest risk. This opens the door to the exploitation of unbanked low-income families through high-interest alternative financial services. This paper studies the causes and effects of financial illiteracy and exclusion in the most at-risk demographic groups, and solutions proven to bring them into the financial mainstream. This paper finds that immigrants, ethnic minorities, and low-income families are most likely to be unbanked. Furthermore, the causes for being unbanked include the high fees of bank accounts, the inability of Americans to maintain bank accounts due to low financial assets or time, banking needs being met by alternative financial services, and being provided minimal help while transitioning from welfare to the workforce. The most effective solutions to financial illiteracy and exclusion include partnerships between nonprofits, banks, and businesses that use existing alternative financial service platforms to transition the unbanked into using products that meet their needs, educating the unbanked in the use of mobile banking, and providing profitable consumer credit products targeting unbanked families with features that support their needs in addition to targeted and properly implemented financial literacy programs.

Suggested Citation

  • Abhinav Shanbhag, 2022. "Exploring Causes, Effects, and Solutions to Financial Illiteracy and Exclusion among Minority Demographic Groups," Papers 2210.11403, arXiv.org.
    • Handle: RePEc:arx:papers:2210.11403
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    References listed on IDEAS

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    Cited by:

    1. Rosit, Jett Xyrich G & Bancal, Derek Ham A & Baraquil, Kristal Era M & Bongabong, Rea Mea R & Fernandez, Jeanna Shandy M & Mamales, Gretchen Mae T & Ortillano, Edwin Jr & Sabillano, Myrna S & Torregoz, 2024. "Family Involvement and Saving and Spending Behaviours as Predictors to Financial Literacy of Senior High School Students: A Quantitative Investigation," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(4), pages 2430-2440, April.
    2. Esther Yin-Nei Cho, 2024. "A qualitative investigation of financial decision-making and enabling factors among ethnic minority young adults in Hong Kong," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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