What is Financial Wellness?

Officially speaking, financial wellness has different meanings, depending the aspect of financial stability it is referring to. Broadly speaking, we can say that financial wellness refers to the strength and stability of a monetary situation of a person, family or organization. Any monetary situation can be threatened by the unknown and financial wellness refers to the financial resiliency against possible unknown forces. Financial wellness also refers to the present situation of a person, family or organization. If an entity has savings, is planning for the future and is comfortable with their present money situation, they are said to have financial wellness. What is financial wellness? The present stability and future resiliency of your money.

Introduction to Financial Wellness

With so many similar financial wellness definitions being thrown around, and financial wellness programs popping up in communities around the world – what is financial wellness? In answering this question, readers must appreciate that the term has slightly different definitions with each organization and government agency. On the whole, financial wellness is about assessing the financial health of an individual and coming up with ways on improving the situation of some people. Considering the desire for financial wellness among employees, some companies have implemented financial wellness programs in hopes of boosting the productivity and morale of their employees. When asking, “What is financial wellness,” we must consider the people it refers to.

Patterns for What is Financial Wellness Applications

Programs for What is Financial Wellness Operations

Financial Wellness as Defined by Financial Organizations

“Well-being is defined as having financial security and financial freedom of choice, in the present and in the future” (Consumer Financial Protection Bureau).

“Financial wellness is defined as ‘effectively managing your economic life’” (Questis).

“The combination of knowledge, skills, attitudes, and especially behaviors that people need to make sound personal finance decisions, suited to their social and financial circumstances” (United Nations). https://www.un.org

What Experts Say About Financial Wellness

“The number one problem in today’s generation and economy is the lack of financial literacy.” – Alan Greenspan, former Chairman of the Federal Reserve

“I want kids to understand the importance of savings and investing. It’s crucial that people understand the importance of financial literacy, because it’s actually life-saving.” – Mellody Hobson, President of Ariel Investments

Educating the Public About Financial Wellness

It is well known that in order for people to maximize their financial wellness many will turn to financial wellness training classes or other means to increase their skills. This means applying financial knowledge to assess the different financial scenarios that will come up. Effective financial education solutions should incorporate exercises that involve applying knowledge to real-world case studies. Other ways to stimulate behavioral change are outlined in national strategy documents published by federal agencies and education organizations.

The Federal Reserve Board’s Division of Consumer and Community Affairs claims that public service announcements could connect people to essential financial education material. Programs could partner with local newspapers to help elucidate the economic benefits of financial competency (Federal Reserve). https://www.federalreserve.gov

The President’s Advisory Council on Financial Capability requires financial materials to be readily accessible and affordable for members of the community (US Dept of the Treasury). https://www.treasury.gov

Social Learning Helps with Financial Wellness

40.2% of those with low levels of financial literacy relied on parents, friends and acquaintances as their most important source of financial knowledge, compared to 20.8% of those with the highest levels of financial literacy (National Bureau for Economic Research). http://www.nber.org

Parents who have three or more types of savings are more likely to have kids who discuss money with them (83% vs. 66%) and less likely to have kids who spend money as soon as they get it (40% vs. 52%) or lie about their spending (34% vs. 43%) (Money Confident Kids). http://www.moneyconfidentkids.com/content/dam/money-confident-kids/PDFs/PKM-Surveys/2017_PKM_Results.pdf

Young Adults Show a Need for Financial Wellness Education

65% of adults in the United States report using a saving account (National Foundation for Credit Counseling). https://www.nfcc.org

37% of recent college graduates have been late with a student loan payment at least once in the past year (US Financial Capability). http://www.usfinancialcapability.org

44% of Americans aged 22-26 do their own taxes (Bank of America). https://about.bankofamerica.com

Employers Seek to Improve Financial Wellness Among Employees

When asking yourself, “What is financial wellness,” the key thing to keep in mind is that it’s a measure of the financial health of an individual and that it encompasses possible solutions that can avoid the dire situation of others who have found themselves in a tough financial situation. Despite our public education system providing little to no support regarding financial well-being, even corporate employers have stopped and asked themselves, “What is financial wellness and how can we improve it among our employees to create a more productive workspace?”  Read more about financial wellness providers in your local area.