By Dr. Barbara O’Neill, Rutgers Cooperative Extension
Financial health matters… to everyone. Top 1%, bottom quintile, or any income in between, we are stronger as a country when people are financially healthy:
- Financially Independent Citizens– Less burden on government services that everyone pays for.
- Happier People- Less anger about the American Dream slipping away and “haves” vs. “have nots.”
- Better Physical Health- Resources for healthier eating, medical care, and periodic check-ups and screening exams.
- Stronger Economy- Resilience during economic downturns and increased number of investors, shoppers, and households with banking relationships.
- Fewer Predatory Loans– Less need for high-cost payday and car title lenders and check cashers.
My work includes studying health and personal finance relationships. I’ve written a book, Small Steps to Health and Wealth™, conducted research about health and financial practices, and developed five savings challenges. Two phrases come to mind when I define financial health:
- Small Steps- Any step forward is progress. I once taught a class series for struggling single parents and encouraged them to save loose change as “homework” in between classes. One participant beamed as she told me about saving $11 in one week. Her new-found sense of empowerment was remarkable.
The 57% of Americans who are struggling financially according to the CFSI Consumer Financial Health Study, need to experience similar successes to build self-confidence and wealth.
- More Options– Financial health provides the ability to move cross-country, change jobs, help a friend or relative, take a vacation, leave an abusive relationship, retire at a certain age, etc. It puts people in charge of their money, not the other way around.
How do we get more financially healthy Americans? Help them plan and coach them to succeed.
Planning- My research found that people who are planners perform recommended financial (and health) practices more frequently than others. Consumer Federation of America studies find those with a savings plan are more likely than non-planners to save money and achieve financial goals.
Coaching– Formal financial coaching programs have recently become available. However, anyone can informally empower others by helping them find information and encouraging them to reach their goals.
Several recent studies have classified personal financial practices into categories. Each used a different term to describe a positive constellation of behaviors:
- Financial Well-Being (Consumer Financial Protection Bureau)
- Financial Health (Center for Financial Services Innovation)
- Financial Capability (FINRA Investor Education Foundation)
All three entities include goal-setting and planning in descriptions of financially successful people:
- People with financial well-being “are setting goals important to them and working toward those goals,”
- Financial health includes “staying on track to meet long-term goals,” and
- “Planning ahead for predictable life events” is a component of financial capability.
Financial planners often say “people don’t plan to fail; they fail to plan.” Planning increases future-mindedness and a well-tested research theory links planned behavior to action.
To improve America’s financial health, start where people are. Encourage them to set personally meaningful goals and celebrate any positive action as “success.” Financial health matters to everyone. Let’s make it a national priority.