What is financial wellness? Many people assume that financial wellness has to do with having enough money, and then having the knowledge and skills to know what to do with it.
In fact, even the National Financial Educators Council defines financial wellness as: “Possessing the skills and knowledge on financial matters necessary to confidently take effective action that best fulfills an individual’s personal, family and global community goals.1”
But what if financial wellness involves even more?
According to The Aegon Financial Wellbeing Index2, although having money and skills is important, it is not the most important aspect of financial wellness. The research findings can help you create financial wellness among your students by offering them a program that helps them achieve true financial health.
The Research States
The Financial Wellbeing Index looked at several factors to determine financial wellness.
Of course, they looked at income level and budgeting skills – two important money factors. They also looked at a third money factor called “affordability of debt.”
In other words, how well an individual could handle their debt level. But the research also looked at mindset factors. The three mindset factors included:
- The ability to look to the future
- Having a financial plan
- Understanding what makes them happy
Despite most people assuming that money factors are the most important when it comes to financial wellness, it turns out that having the right mindset about money is more important.
Let’s Talk About Mindset
Although people like to say that money doesn’t buy happiness, most students would agree that not having enough money would make them feel bad – and that having more money would change their financial wellness.
The research found that although having enough money is important, it isn’t as important as the way a person feels about the money they have.
That’s actually a good thing when it comes to student finances. The truth is that most of your student population isn’t going to be able to change how much money they make while in school.
If they already have debt, they are unlikely to have the funds to lessen that debt very quickly. Nor will they have the funds to easily gain an emergency fund or save money for the upcoming semester.
These “money factors” take time to change.
However, mindset factors are easier to change and can make a huge impact on a financial well-being score. Changing someone's mindset isn’t all that difficult.
It can mean helping a student set future financial goals and determining the steps needed to achieve that goal. Or it might mean helping students stop focusing on the amount of money they have, and focusing on using the money they have wisely instead.
Financial literacy is important because it is the key to having the skills and knowledge needed to make and complete goals and the habits needed to use money appropriately. When financial literacy is combined with mindset, students get the greatest financial satisfaction.
3 Things a Student Financial Wellness Plan Needs
So, how can you put this research into action? You’ll need to have a student financial wellness plan that addresses all aspects of financial wellness, including:
#1: Financial Knowledge and Skills
Without a doubt, a student financial wellness program needs a strong financial literacy component.
A recent Student Voice Survey3 found that 58% of students rated their financial knowledge as fair or poor. Of students taking out student loans, 20% do not know how much debt they will have at graduation and half of these don’t know how much their monthly payments will be. Just as concerning is that one in four students has credit card debt.
The survey found that most students feel comfortable talking with their friends about financial topics, including such things as the cost of college, student loans, credit cards, budgeting, investing, and saving money. But are they getting the right information?
The financial wellness program chosen for students needs to be as easy to use as chatting with a friend while providing accurate information. To do this, the program needs:
- 24/7 access
- Accessibility across multiple devices
- Different ways to gain information: videos, games, articles, classes, etc
Plus, you will need to communicate the existence of the program to students so that when they have financial questions, they know where to look.
The Student Voice Survey found that two-thirds of students have no idea if their college offers any type of financial wellness program.
Keep Reading: How Do We Make Financial Literacy Education More Effective?
#2: Help Setting Goals
Goal setting is a crucial element of financial wellness, but students may not feel comfortable setting goals if they don’t know the steps they need to take to achieve these goals.
The Aegon research found that nearly nine out of ten participants had no financial plan. In fact, one-third of the participants didn’t even have a future financial goal they could articulate.
Helping students set goals and provide action steps to achieve these goals will help them stay accountable. They will be able to see their progress and celebrate their success along the way.
When a student feels like they are in control of their finances, their financial wellness score improves.
#3: Address Money Mindset
Finally, you need a component that will help your students understand their relationship to money. Is the student a spender or a saver? What makes the student happy? How does money help create this happiness? What money skills do they have? What money skills do they need?
iGrad has a unique assessment called “Your Money Personality.” This is a Myers-Briggs type evaluation that helps students determine such things as:
- Emotions concerning money
- Financial behaviors
- Financial focus
- Financial influences/influencers
- Money outlook
- Strengths and challenges
After taking the assessment, a student receives guidance based on their personality to help them achieve a greater sense of financial wellness.
1 - https://www.financialeducatorscouncil.org/financial-wellness-definition/
2 - https://lifeworks.com/en/media/204/download?inline
3 - https://www.insidehighered.com/news/2022/02/25/survey-college-students-need-help-financial-literacy
