What is the definition of financial wellness?
Buzzwords, popular phrases with little meaning, creep into virtually all business-speak. You can hear current buzzwords like big data, change agent, innovator, and pain point spattered throughout the corporate environment.
The problem with buzzwords is that the once popular and fresh phrases soon become overused and lose their power.
For some companies, financial wellness has become such a buzzword. The problem is that financial wellness, though shown to be excellent for both companies and employees, is not easily defined.
What Financial Wellness Isn’t
Before we define what financial wellness is, let’s state what it isn’t.
- It is not just a buzzword. In the APA State of Our Nation1 survey released in November 2017, 62% of American adults stated that money concerns were their most common stressor. Companies that offer true financial wellness programs do so to change the lives of their employees.
- It is not just classes on retirement planning or debt management or credit repair. Americans have had access to financial education for decades, yet according to Bankrate’s January 2018 Financial Security Index2, only 39% of Americans have at least $1,000 in savings for emergencies, and the 2016 US Bank Possibility Index3 shows that only two in five American households follow a budget.
- It is not being wealthy, because wealth does not equate to happiness or well-being. In his book, “Your Money: The Missing Manual,” author JD Roth states, “If you have clothes to wear, food to eat, and a roof over your head, increased disposable income has just a small influence on your sense of well-being.”
The Right Definition
Capturing a complete definition of financial wellness is tricky because it means different things to different people. At its most basic level, financial wellness is a holistic approach to counter financial illness.
This holistic approach includes a combination of factors such as:
- Satisfaction with current finances
- Increasing positive financial behaviors like saving, reducing debt, and budgeting
- Financial knowledge that helps to change behavior
- Reduced financial stress
- Creation of a financial plan to reach desired financial goals
One Size Does Not Fit All
One reason that financial wellness is so difficult to define is that what it means depends on who is defining it.
An organization that provides financial wellness may include any number of goals, which can include stress reduction, money management, emergency preparedness, increased benefit participation, and/or retirement planning.
These goals are met through a variety of online and in-person programs meant to shape employee’s thoughts and habits about money-related issues.
Similarly, each individual’s approach to finance will differ in terms of goals, background, knowledge-level, and behavioral challenges. Each will also respond differently to different stimuli and incentives to participate.
So, much like physical wellness, while the basic core competencies of financial wellness are the same across the board, the precise goals and components will differ from corporation to corporation and person to person.
Enrich believes that financial wellness is an ongoing, evolving, and personal concept based not only on financial literacy but also on the successful implementation of these sound financial principles now and in the building of a sustainable financial future.
Ultimately, we define financial wellness as having the knowledge, ability, and desire to make intelligent financial decisions, as well as having the capacity to live a happy life within one’s means.
To see how the Enrich Platform improves Financial Wellness, check out our demo video here.
1 - https://www.apa.org/images/state-nation_tcm7-225609.pdf
2 - https://www.bankrate.com/financial-security-index/
3 - https://stories.usbank.com/dam/possibilityindex/USBankPossibilityIndex.pdf