Finance is full of gimmicks but none of them will help America's savings crisis - here's what will

M1 Finance

Brian Barnes, M1 Finance

• There's a savings and retirement crisis in the US, but many of the apps and companies that have popped up to address the problems Americans face fall short.
• Folks should avoid the fintech gimmicks and embrace engaged investing to build up the necessary nest egg for their future.

The financial future of the average American looks vastly different than it did a generation or two ago. Instead of holding long-term jobs that offer pensions, people today are more likely to have several employers throughout their career and be responsible for managing their own retirement funds.

Given that the Federal Reserve reported this year that 53 percent of adults with self-directed retirement accounts are not comfortable or are only slightly comfortable in their ability to make financial decisions, this is a worrisome trend.

And it's not just retirement we're struggling with:

• A whopping 69 percent of Americans have less than $1,000 in savings.
• Household debt has recently reached an all-time high.
• Student loan debt has topped $1.3 trillion.

The good news is that today's fintech startups offer a variety of digital alternatives to pension funds, 401(k)s, and savings accounts, many of which are intuitive and convenient. The bad news? A lot of these startups - in a bid to stand out amid the noise - are promoting gimmicks in lieu of solid financial strategies and education.

We've all heard of them: the program that attracts new investors by insisting they can get ahead by investing spare change; the funds that group companies by "theme" (health ETFs, booze ETFs); the ones that encourage day trading with zero commissions.

Here's the problem with gimmicks, though: they don't work.

Consider the fitness industry. It's notorious for gimmicks that will help us get fit, once and for all: shoes that "sculpt" while you walk, bracelets that track your activity, workouts that are based on brand-new science and will work faster and better than all other workouts.

In reality, you don't need special shoes or a bracelet or a specialized weightlifting routine. You need enough knowledge to make good decisions in any situation, and then you need to use that knowledge to build good habits. Because eventually, those shoes will wear out or you'll lose your magic bracelet or you'll move too far away from your gym.

You need strategies for staying fit no matter what life throws at you.

Investing is the same way.

Engaged Investing: A strategy for whatever comes along

There's not a single investment strategy that will make sense for everyone. And maybe more importantly, nobody will have the same investing goals throughout the course of their life. That's normal.

So even if you learn the ins and outs of how to pay down your college debt in five years, when that five years is over, you may have no idea how to build up your retirement fund or save for a down payment.

A better, more comprehensive, strategy is what I call "engaged investing." It's somewhere between active and passive. At its core, this means learning as much as you can about your money and the ways you can invest it so that you're equipped to make a good financial decision whether you're facing job loss, a windfall, retirement, a major illness, buying a house, sending a kid to school, caring for an aging parent - or anything else.

More to the point, it means taking ownership of your finances rather than blindly trusting (and paying) an advisor.

The reason engaged investing is so powerful is that it takes away the scariest part: the unknown. I don't think there are many (any?) people out there who are thinking, "No, I don't want to have enough money when I retire. I'd rather just wing it." But a lot of us are headed in that direction exactly because we're not sure what to do. We're not taking action because we don't know what actions to take.

Investing is like exercise. You don't have to be perfect when you start. Nobody expects you to run a marathon the first time you lace up your sneakers. But you have to actually do it to see the results you want. You have to take the first step to be able to take the next ones.

So what would I recommend? In finance, as in fitness, the long-term solution is to build good habits - don't look for the quick fix or the performance enhancer. Start small, but start. Embrace your ignorance and seek out ways to educate yourself. There will be ups and downs; you'll make mistakes. But ultimately, you'll be better off doing something than doing nothing.

And really, there's no better way to learn than to do. After all, you can't improve your mile time without first running a mile.

So invest a little money. See how it works. Get to know the ins and outs of a platform so you can invest more once you have the hang of it-or switch to another platform. Remember: the key isn't to do everything right. It's to do something and to stay engaged.

Brian Barnes is the founder of Chicago-based roboadviser M1 Finance.