A new survey found that employees who rated their own financial knowledge higher were more likely to use the financial wellness tools given to them by their employers. That’s good news, of course, but what about those with less ‘financial courage’? They will likely need the help more, but won’t have the confidence to use the financial wellness programs provided. Houston, we have a problem!
Turns out this data is just telling us we need our financial wellness programs to do more than just educate. These programs need to create financial self-confidence, or courage, as the survey’s author’s named it. We need these programs to actually empower learners first, if we want to even begin to help those who need it most.
Casualties of the easy-money financial environment
To find a solution, it helps to step back first. Where does this lack of courage come from? While nobody knows for sure, we do know that it’s easier than ever to make financial mistakes. Why? Well, in the good old days, most of us could only spend what we earned. Other than generous parents or maybe loan sharks who would hunt you down if you didn’t repay them, no one was readily handing out personal loans. In fact, it was downright hard to get money!
Fast forward to today….credit card companies hound us with offers the minute we have a job. We can buy thousands of dollars’ worth of cars, stereos, furniture, vacations, dinners and other stuff on credit. In fact it is far harder NOT to spend money we don’t have yet, than to just live within our means.
The problem is, along with this easy money, few were taught the dangers of credit, or how to handle it responsibly. So, we shouldn’t beat ourselves up too much on the end result. Without this prior training, many people get in trouble early on in life then give up, thinking they are doomed to poor financial decision-making forever.
Then a lot of people also believe money is some mystical, ultra-complex topic. Hmm…where on earth could this idea come from? Well turn on CNBC or Bloomberg and you’ll get your answer. Everyone on there has a suit and a tie and appears to know how to predict the future. They all look very smart and everyone listens. So they must be right all the time? Or…most of the time? Well a study found that most are wrong as or more often than they are right. Similar odds to a coin toss.
Telling it like it is
Fortunately, when we let people know that all those experts are wrong at least half the time, their personal track records with money decisions don’t look so bad anymore.
So just like with the Wizard of Oz, our financial wellness programs need to peel back the curtain and acknowledge all these fears and illogical ideas for what they are.
However, there’s other issues. A lot of times, people think they are so far in the hole that they will never achieve financial security, so they give up. These people need facts. They need to learn how compound interest works and how saving small amounts early and often, and investing that money, can make a huge difference over time. And how handling their debt in a similar manner can allow them to get, and stay, in control faster than they may realize.
The other thing that we have to deal with is that those with low financial self-confidence often think they are the ONLY ones who struggle with money. Well, the secret we need to let them in on is…everyone at some time in their lives, struggles with money. Even those far-too-serious types on CNBC have had money problems. Even Ben Bernanke, when he was acting President of the Federal Reserve, couldn’t get approved for a new home loan to refinance his house.
Money mistakes and money problems are just part of being human. No one is perfect and no one is alone in money struggles.
This is where teaching behavioral techniques, along with these interesting tidbits, instead of standard “finance” education, is critical. There’s literally tens of thousands of great books, seminars and workshops on how to create a budget, or how to calculate your net worth. But this is not about mechanics. It’s about emotions and fears and irrational thoughts. By dispelling these myths, we show a path to peace of mind and an end to constant money stress. That is the education needed most in today’s easy money environment.
This is all very good news for the financially gun-shy. They learn that it doesn’t take a PhD in math or a wall of computers to be good with money. Instead, we just need to think before we spend. We need to separate “wants” from “needs”. Put another way, we need to consider our future before we buy another new car when the old one still runs fine. And we need to consider how stressful it will be when the credit card bill arrives when we are tempted to buy the new pair of shoes when we already have 10 perfectly good pairs in the closet.
This way, we can build confidence through taking easy steps, every day. If we fall off the wagon and backslide a bit, that’s okay, we all do. But this is far better than a cold-turkey, extreme makeover approach that, like crash dieting, doesn’t yield permanent results.
Week after week, these easy steps create confidence, and courage.
Soon our formerly finance-averse employee is using our financial wellness tools and improving their financial health. We have an empowered consumer who is ready to learn and change their financial outlook. While it’s not a magical solution, it’s the start to a better tomorrow.
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Wavelength Financial Content Inc. provides user-friendly and affordable financial wellness programs and digital content for financial advisors.