by Nick Lawlor, Director, The Wellness Crew
What if I told you that only 55% of Irish people consider themselves to be ‘financially literate’? Would you tip your hat to those 55% or spare a thought for the 45% who don’t have any confidence when making a financial decision? My concern is greater than that. I am concerned that even the 55% who make informed financial decisions on day 1 never review these decisions. It is one thing to become financially savvy, it’s another thing entirely to manage your household finances on an ongoing basis.
Change is good
“Competition is good for the consumer”. We’ve all heard that one, right? Well, in the financial planning world, it’s true! Hands up if you have ever changed your car insurance provider to save €20? … Yes, me too! So why haven’t you looked at changing your provider for your life insurance or your savings plan or your investment? Better financial products become available all the time so it’s always advisable to review your past decisions every 2-3 years.
It’s not too late to learn!
Now regarding the 45% who don’t have any confidence making financial decisions. Firstly, it’s not all that surprising an amount of people really. Do you remember that class in school that taught us all about how to read a payslip, and file a tax return, and save for future events? Nope, me neither, because it didn’t exist!
How can you be expected to know what you’re doing when your full-time job has nothing to do with finances or financial planning? Thankfully, more and more companies are rolling out an Employee Financial Wellness programme as part of their overall wellness offering to employees.
Reducing financial stress
Most people can relate to some form of financial stress. In fact, some 34% of Irish people consider themselves ‘extremely concerned about their finances. There are, of course, various levels of financial stress but the first step towards reducing this is education. Companies that have a financial wellness programme as part of their employee wellness culture see their employees enjoy improved knowledge about their own financial planning needs, and greater confidence making the relevant financial decisions for their household.
What to include in a financial wellness programme
These programmes should focus on 2 aspects of your financial planning needs:
- Preparation for the “Rainy” days
- Preparation for the “Sunny” days
Nobody likes talking about insurances and what may or may not happen to us around the corner, but the reality is “life” happens. The question is, have you already made the necessary decisions to protect yourself and your family from the financial burdens of “life” happening?
Unfortunately, for a lot of people, the answer is no. There is an inertia towards preparing for the rainy days due to lack of knowledge and understanding. For me, this is the main benefit of an Employee Financial Wellness programme as part of your wellness culture. People should take more ownership of the financial decisions that they make, and this begins with education.
It’s nicer to talk about savings, investments, pensions, etc. Talking about making money grow and enjoying it. Arriving to holiday time and having the necessary money there in a “holiday” fund. Your children arriving to college and knowing you have set aside the children’s allowance for 18 years and the projected €10,000 per year costs are catered for.
Retiring on your terms, at your desired age, with the perfect amount in your pension pot to live the retirement life you’ve been dreaming of.
Some of you are nodding your heads to these examples, others just got a knot in their stomach reliving the stress of an under-funded holiday that required the use of credit cards and overdrafts. Some may not have ever sat down to research the projected costs of 3rd level education in Ireland (it really is up to €10K per year!). And what if I told you that 40% or Irish people will retire and still have a mortgage to pay? That is a financial planning fail 101.
The solution is not difficult. Identify your future financial events and plan to address them. Nobody needs much help spending their money today and tomorrow. Sometimes, however, a little help is required to shine the light on responsible saving and preparing adequately for these events.
This is the purpose of a Financial Wellness programme, eliminating the stress associated with not being able to afford the holiday, your child’s college costs, or retiring when you want to retire.
Education is the key
Bottom line, taking more ownership of your financial decisions begins with education which builds confidence. You should have confidence when deciding what you put in place for your household in preparation for both the “Rainy” days and the “Sunny” days.