What is financial health and wellbeing?
Financial wellbeing is a state of being wherein a person is in control of their finances and is able to meet all current financial commitments. It’s about having a sense of financial security, feeling confident about their financial future and the financial decisions they will make.
Financial wellbeing is considered as one of the eight interconnected components of the Wellness Wheel (Bill Hetler, 1996) and refers to one’s current and future state of their finances, their financial education, financial security and the freedom in financial decision making.
Security here, alludes to being mindful, calm and in a clear state of mind. Basic needs will be met and someone’s in control over their finances, remaining undamaged in the occurrence of a financial adversity. Security is interlinked with freedom of financial choices, in which the choices made will not come with a negative financial impact due to any preventative measures.
Want to get a clear idea on what financial wellbeing is, you can watch this short video (with your students)
What is the impact of financial wellbeing on total health and wellbeing?
As stated before, financial wellbeing is interconnected with other health components, in which its negative state could have a negative influence on each of the other health components. Oftentimes, students that find themselves in financial hardship will experience stress caused by the insecurity (“will my basic needs be met”). This stress it causes, which can be quite severe, could affect the mental and physical state of the body which in its turn could have a negative impact on relationships, jobs, study etc. Therefore it’s important to create awareness on this topic. Breaking the taboo on money creates a safe space for students to talk about money issues and discuss the questions that they have. Feeding into that safe space will in its turn create a brave space for students where they can grow and nurture their financial education and experience. Raising the issue will help your students to be financially healthy.
Explain the four elements of financial wellbeing
- In 2015, The Consumer Financial Protection Bureau performed a survey to determine four elements of financial wellbeing. Having these elements/goals in place creates a healthy financial state of wellbeing. Keeping these elements in mind could make it easier to work out some strategies.
- 1. Control - security in the present: Control over your financial resources on a day-to-day and month-to-month basis. The focus doesn’t lie on having money but managing the money, the present expenses. In this case the money doesn’t control the student and it doesn’t cause any stress.
- 2. Adversity - security in the future: When the first element has been reached, the next step is to shift the focus to the future. Being prepared to absorb any financial adversity or spending shock, oftentimes caused by an unforeseen emergency. Only when prepared adequately for these emergencies someone’s financial stability will remain undamaged.
- 3. Thrive - freedom for the future:Financial wellbeing connects to someone’s ability to thrive, it influences how someone is feeling mentally and physically. With a higher sense of financial wellbeing students will meet their financial goals. Continuity is key, staying on track with setting important goals and working towards them.
- 4. Flexibility - freedom in the present: Freedom to make choices that cause them to enjoy their lives. There is a certain degree of flexibility which Amanda of Dream beyond Debt, captured as “the ability to spend money on what I want, and not on what’s available or what I can get the lowest price because that’s all I can afford”.