Remember the days when you had to sit down at your kitchen table with a stack of bills, stamps and your checkbook and pay the bills for a few hours? Then you would do something that very few younger households know how to do anymore: balance a checkbook. Those were the days! (Find out how to assess and evaluate both these values in the market and your portfolio. Check out Which Is Better: Dominance Or Innovation?)
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The way we run our financial house has changed drastically. Technology has evolved so much that, despite there still being some baby boomers balancing their check book (and walking around with teased hair) most modern households use financial software to track their expenses. Let's take a look at four of the most important technological innovations that have changed how we attend to our personal finances.
- Electronic Trading
Your only exposure to the stock market may be when they read the numbers on the nightly news, or you may have a retirement fund that is managed by somebody else. Nonetheless, there are millions of people trading stocks and other investment vehicles. Electronic trading dates back to 1971, when the NASDAQ first opened. Although this wasn't an actual trading platform, it quickly evolved into the world's first major electronic stock exchange.
Prior to electronic trading, each of us had to call our stockbroker, who would call a person on one of the stock exchange floors, who would sell the stock to another broker on the floor. The system was labor intensive and expensive, and it often kept smaller investors from participating.
Now, electronic trading, where computers match buyers with sellers, has allowed individuals to access the stock market. Because computers allow those who aren't in the financial field to access instant information and trade stocks for only a few dollars, the stock market is now an eclectic mix of large financial institutions and individual traders. (Learn how British coffeehouses helped give rise to the juggernaut that is the NYSE. Read The Birth Of Stock Exchanges.)
- Electronic Banking
Instead of balancing your checkbook, you probably match up transactions in your financial software by either instantly downloading information directly from your bank or signing on to your bank's online banking website. Nearly all of our day-to-day banking activities can be accomplished from the comfort of our homes. In fact, some of the larger banks now have mobile applications where customers can take a picture of a check they want to deposit and send the image to their bank for deposit.
Online banking started in 1981, when four New York banks offered a service using the videotext system. This service never took off in the United States, so this online banking service was rarely used. In 1994, the first true internet banking service was introduced by Stanford Federal Credit Union and since then, online banking has become the norm.
A shopper's dream was born in 1991, when the internet was opened to commercial use. By 1994, ecommerce, shopping for products online instead of traveling to a brick and mortar business, was in full use and has not only made for a more convenient shopping experience, but has also changed the face of the retail business model.
No longer is a business only competing against another business in their community. They are competing against businesses all over the world, and that is good for the average consumer. Before purchasing, the consumer can now find detailed information that allows them to make a more informed choice, and more competition means lower prices.
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Coupons have come a long way since their introduction in 1894. And if you're an avid coupon clipper, you know about e-coupons. Rather than hunting through the newspaper and coupon sites, we can now go to a website and have the coupons we want on our mobile device. Then, we scan our cell phone and the coupons are automatically applied. We'll soon be done with the days of the grocery store clerk hunting through our bags to find an item because the coupon didn't scan correctly. (The average American household has four credit cards, but does that mean more is better? See How Credit Cards Affect Your Credit Rating.)
The Bottom Line
Technology has brought about innovations that have made life more efficient. If you still enjoy balancing your checkbook, shopping at malls, and clipping coupons, have at it. But if you want to save time and money, get onboard with 21st century financial technology. For the latest financial news, see Water Cooler Finance: Rising Markets And Buffett's Successor.