Like Goldilocks, With Financial Confidence Individuals Need ‘Temperature’ To Be Just Right
By Dan Kadlec
December 7, 2017
Confidence about money is a tricky issue, not unlike Goldilocks and her porridge. Too much confidence leads to poor decisions. Too little confidence leads to inaction. But just the right amount of money confidence—the perfect temperature, if you will—leads individuals to ask questions, and with the answers take important actions on things like 401(k) contributions and paying down debt.
Financial confidence underpins “financial courage,” which is an important key to overall financial wellness, Mercer found. Only through financial courage does one confront their knowledge gaps and ultimately make wiser personal money management decisions, Mercer concluded.
This finding is changing the financial education landscape at many companies. If financial confidence, or courage, correlates with financial well-being—and it does—what employees may need more than any textbook knowledge of money is an easy and timely way to get the answers that they have the courage to seek.
Teachers, employers and policymakers might keep this in mind as they set a course to help individuals better manage their money. Classic financial education will always have its place. Indeed, it is one source of financial confidence. But what may be more important are tools that quickly steer an individual looking for answers. Such tools might include online resources like mymoney.gov and AskCFPB. They might include hotlines or one-on-one counseling.
For those who lack financial confidence, improvement is most likely to occur through baby steps—by making small financial decisions and building courage gradually. Individuals will not gain confidence if they feel overwhelmed. Coaching and accessible tools help them get past feeling lost, and small wins keep them interested in learning.