Cake wants to help people better understand, control and improve their finances. To do so, we also work together with experts such as CEBUD, the Centre for Budgetary Advice and Research. We talked to Ilse Cornelis and Nele Peeters from CEBUD and Jessica Ruelens from Cake.
Cake’s mission is to improve the financial well-being of all its users. We do this primarily by helping people understand, control and improve their finances.
What is CEBUD?
Ilse: CEBUD stands fully for the Centre for Budgetary Advice and Research. As a research group, we are affiliated with the Thomas More Social Work Department. On the one hand we conduct research and on the other hand we offer services based on the research we do. This way, we also pass on the knowledge we gather in research to the work field. We don’t want to do research for the sake of research, but also actually give something back to society. That is our mission.
Nele: We work around 3 important pillars. First and foremost, in recent years we have built up unique expertise in practice-based research into Reference Budgets and their use for social participation. We try to answer the question of how much income someone needs to be able to participate in society. For this purpose we also developed a tool (REMI) that is used by OCMWs.
In addition, in our projects we also put a lot of emphasis on two other pillars. In the Poverty pillar we focus on the question of how the social participation of vulnerable target groups can be encouraged. To this end, we collaborate with municipalities and develop policy measures.
In the Money and Behavior pillar, we examine how we can achieve effective budget and debt assistance and how we can ensure that consumers are financially sufficient. It is within this pillar in particular that we collaborate with Cake.
Ilse: The insights and methods about money and human behavior are generic. The behaviors and mechanisms are not only valid for people in financial problems. They are applicable to everyone who deals with money. That means all of us!
What do you do within CEBUD?
Ilse: We mainly work on Money and Behavior. I am a psychologist by training and very interested in how you can encourage behavioural changes, which is obviously extremely important for financial resilience. Additionally, I love quantitative data and I am responsible for the statistical analyses of the reference budgets.
Nele: I am a sociologist and rather look at the role of larger patterns and social structures. Our team is multidisciplinary and consists not only of sociologists but also of a psychologist, a computer scientist, an economist and a commercial engineer.
What is financial resilience and what do you need for it?
Nele: Already in 2011 we defined financial resilience as “sustainable budget management”. In the meantime, we have evolved to a new term and definition: income and spending in balance now and in the future.
Ilse: We have also abandoned the term “self-reliance”. It is important to ask ourselves how much “self-reliance” we may expect from everyone? By going from “self-resilience” to “resilience” we are saying that seeking help is okay. And sometimes it is really necessary. You don’t have to do it all yourself.
Nele: To be financially sufficient, you need three things. First, a humane income, not only in the short term but also in the long term. Secondly, you need financial knowledge and skills. And thirdly, you need to exhibit healthy financial behavior. And those three need to be in balance.
Ilse: If you have a high income but insufficient financial skills and unhealthy financial behavior, you might as well get into trouble as someone with the right skills and behavior but an insufficient income.
Why do CEBUD and Cake work together?
Jessica: Already in the first months of Cake, when the development of the app hadn’t started yet, we contacted CEBUD. We were looking for a scientific foundation for the design of our app. Until then we had gathered a lot of general research from abroad, but we were in need of local relevance. We were looking for ready-to-use guidelines for Belgium.
We needed concrete answers to questions such as “What is a good income?”, “What is a healthy spending pattern?”, “How much should you save?”. When we heard about CEBUD’s reference budgets, we knew immediately that we had come to the right place.
Nele: We were also immediately enthusiastic. An app like Cake removes a lot of hurdles because everything runs automatically as soon as your bank account is linked to the app. Awareness is the first step in financial resilience. You need to have an overview before you can go to insights and change behavior.
Ilse: Those first steps are very important. If they are automated in an app such as Cake, an important barrier will already be removed.
This insight also fits in with the research on Slow and Fast Thinking by psychologist Daniel Kahneman. We need to make people aware of automatic behavior. We all get scared at the end of the month when the money is suddenly “gone”. If you dig a little deeper, you will notice that the automatic expenses that are made daily unconsciously take the biggest bite out of some people’s budget. They pass by the candy machine or buy a takeaway lunch. And at the end of the month, they easily lose €100.
Jessica: And that’s how we’re now linearly developing the app. We want to help people better understand, control and improve their budget. The functionalities that the app now offers mainly focus on understanding. We offer super clear overviews of income and spending per category and per week or per month. Gradually more functionalities will be added that will go in the direction of controlling and improving. Soon a user will be able to compare his spending with the average of a group of Cake users with a similar profile. If you know that you spend an average of €400 per month on groceries, you can also check if that is more or less than average. That framework can then be a reason for a change in behavior.
Nele: We also consider Cake as a very interesting research partner. In time, we also hope to learn from the reports on the anonymized spending patterns of the users. Does the spending behavior of people change after they start using the app? Will users who, for example, spend a lot on clothing, simply by gaining insight into the amounts and patterns they spend, also change their behavior? Or does that happen when they are called upon to do so?
What is the added value of CEBUD in the development of Cake?
Jessica: We believe that with the app we play an important role in the financial well-being of users. This is a noble goal, but it also implies a certain responsibility. And we want to deal with this in the right way by testing everything we build against scientific research and by involving experts. We therefore regularly knock on Ilse and Nele’s door with various questions.
For example, we will use a range instead of an exact amount to represent the average spending of Cake users that serve as a reference for your expenses.
What do you expect from Cake for the future?
Ilse: We hope an app like Cake will remove the taboo that still surrounds money. In education, more and more steps are now being taken towards financial education. That was really necessary!
Nele: Recent research also shows that young people know little about their money. Only 27 percent give themselves a high score when it comes to financial knowledge. A lack of financial knowledge goes hand in hand with low financial involvement, which is the extent to which young people are aware of their finances. This is only the case with 42 percent. Certainly with those who have financial problems, the involvement drops to a low point. It also turns out that many parents do not like to talk about money with their children. Telling them how much you earn, how much you spend and how much is in your savings account still seems taboo according to the 2020 study.
Jessica: And that’ s what we really want to tackle at the base. Instead of obscure descriptions on your bank statements, the app gives you clear overviews and grouped insights. And that’s where it all starts.
What can we further expect from the cooperation between CEBUD and Cake?
Jessica: We will continue to work together for the further development of the app. But soon on this blog we’re also going to bring you articles with handy budget facts and tips!
Nele: We are going to talk about organising your administration, the importance of insights into income and spending, saving tips, good intentions, …
Ilse: Above all, we want to show that good financial health does not necessarily require heavy sacrifices. You can achieve a lot with small structural changes in your behavior and still have a good time. So saving really doesn’t always have to be painful.
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