‘Transition’ Literacy May Be the New Financial Literacy

By Jeanne Doran

May 11, 2017

Financial advisers may be masters of money. But what do they know about emotions? That’s a key question that comes into play when helping others through a planned or unexpected life event.

Just as social and emotional learning is revolutionizing education in the classroom, and has been called the missing half of financial education, it is also becoming a part of the professional money world.

Some call it transition literacy, which essentially is the skills and knowledge to manage emotional events like a divorce, death, job loss, marriage, retirement, large bonus, promotion or inheritance in ways that minimize financial fallout or maximize opportunity. Think of it like this: financial literacy plus transition literacy equals smart money decisions.

Susan Bradley, founder of the Sudden Money Institute (SMI), which provides financial transition planning, says there are four core aspects of transition literacy—and they are helpful not just for financial advisers to understand but teachers, students and individuals as well.

Transitions have stages The first is anticipation, when people begin to plan, fear, hope, dream and grieve. Spending may be reckless. During the transition, important investing and business decisions may get delayed to ill effect. At the end of the transition is the new normal, when it becomes important to take stock of your new situation and plan soberly.

Stages may take years The retirement process, for example, may begin two to five years before you actually quit work. This is when you wind down and begin saving and planning for the big day. The transition may last two years into being retired, when you finally decide how to spend all your free time. There is a temptation to want to move quickly and get settled. But that is rarely achieved when your life is being reshaped.

Most people need help A life transition usually comes with legal and financial issues, along with emotional ones. It can be difficult to assess what can wait and what needs to be done now. Transition literacy means knowing when and how to slow down, possibly by making a list of everything you want to do, should do and can do. Then tackle what’s time sensitive first.

Transitions bring uncertainty Transitions have clear triggers. But only in hindsight are the beginning and ending clear. While in the transition, it is difficult to know what will happen next. These periods are full of opportunity to chart a new course by examining wants and needs and using whatever resources come from the transition—time, money, freedom or independence—to shape your future. Understanding the emotional aspects of transitions will lead to better financial outcomes.

Read our series on social and emotional learning:

The missing half of financial education

Giving and taxes through a different lens

How not to eat the marshmallow

How to help kids build self awareness

Money management in a modern family

Why self worth trumps net worth

Posted in Best Practices on May, 2017