Because of its growing popularity, financial wellness solutions are in high demand. These solutions aim to educate consumers and make a lasting impact on their financial health.
Financially healthy people typically spend less than they make and have:
- A steady flow of income
- Savings to cover 3+ months of expenses
- Little to no high-interest debt
- A financial plan designed to meet their goals
Maintaining financial wellness is just like taking care of your physical health. Both require attention, consistency, and some amount of education. A physically healthy person probably visits the doctor to screen for potential issues, reads articles about common health problems, and works hard to maintain an active lifestyle.
In the same way, most people will need a financial expert to help evaluate their finances, obtain education on how to avoid common pitfalls and mistakes, and put in work daily to stay in good “financial shape.” Being financially well is a daily decision and requires diligence.
Despite the growing popularity of financial wellness, a recent survey conducted by the Financial Health Network in 2022 revealed that only 31% of individuals are considered financially healthy. This represents a 3% decrease from the previous year and is the first decline in financial health since 2018. More than 175 million people in the United States are defined as financially vulnerable or coping, which is over two-thirds of all Americans. See the chart below from the Financial Health Network for a visual representation:
Financial health declined for the first time since 2018.
Percentage of people categorized by financial health tier (2018-22).
Of course, we shouldn’t be shocked that financial health hasn’t improved. The reality is that wellness products and initiatives alone won’t change human behavior or solve the economic problems that exist in our society. However, at an organizational level, it is possible to open up windows of opportunity for individuals, by providing education and a chance at building true financial health. Financial wellness is a broad term that can mean different things to different people. At SmartPath, we define financial wellness as an individual’s financial health, which encompasses both short and long-term financial habits around budgeting, saving for retirement, and managing debt.