Financial confidence is an important key to overall financial wellness, new research shows. People that are confident tend to take action—and assuming their actions are well considered this leads to long-term financial security.
These findings lend support to the growing notion that psychology plays a crucial role in developing sound money management skills, according to a report from Mercer.
People that are financially confident—not over confident—may derive their “financial courage” from their willingness to ask questions and seek answers, according to the report. This contributes more to one’s later success with personal money management than any specific knowledge.
Teachers and policymakers would do well to keep this in mind as they set a course to help individuals better manage their money. To gain confidence, individuals need tools to seek answers and take action. One such tool is the online resource mymoney.gov. There are countless others.
To help individuals build confidence, SunTrust launched the OnUp site designed to inspire people to take specific steps to improve their financial wellness. More than 1 million people have taken part. “When people are financially confident, they can enjoy what truly matters,” says Bill Rogers, SunTrust CEO.
Worth noting: income levels do not correlate with financial confidence: 14% of those in the two lowest financial confidence groups have household incomes of more than $100,000, the report finds. One in 10 with high financial wellness scores still spend 20 hours a month worrying about money.
For those who lack financial confidence, “change is most likely to occur through small steps — that is by making small financial decisions and building courage gradually,” the report concludes. Provide students with tools and guidance to work their way through financial decisions. Engagement is what drives knowledge and confidence.
The study warns that people will not gain confidence if they feel overwhelmed with topics they don’t understand. So go slow. It also suggests coaching and tools will help them experience wins that will keep them interested. By integrating lessons that build confidence, teaching financial literacy becomes easier and more effective.