Financial Wellness Differs from Financial Literacy
Financial wellness differs from financial literacy. Clearly, Financial Wellness and financial literacy are not the same things. Surprised? This author was, too. But it turns out there’s a major difference between being financially literate and achieving financial well-being.
Essentially, there are some of the fundamental differences between financial literacy and financial wellness. Financial literacy means the education component — a term a lot of people (including this author) have confused with financial wellness. Some use them interchangeably (again, guilty as charged!). However, financial literacy means gaining awareness and understanding how money works and how to handle it responsibly. It generally includes topics such as how to create a budget, how to manage and pay off debt, and how to create savings for long-term goals, i.e., buying a home or building a retirement nest egg.
On the other hand, financial wellness differs from financial literacy in that the former is the actual implementation of what you know. It’s one thing for individuals to know what they’re supposed to do. Don’t spend more money than you earn, live on a budget, don’t take on debt to purchase items you don’t have the cash to pay for now and save to build wealth for long-term goals such as retirement or a child’s college education. It’s quite another challenge to understand how to do those things consistently, or even to do them at all. Despite “knowing better,” some people still manage to dig themselves deep into debt and choose to pay the consequences later (literally).
All this to say, employers should invest in financial literacy to help their employees become more knowledgeable about how to manage their money day-to-day. Financial literacy and financial wellness are topics previously addressed at 401kTV, and we will continue to do so. But, financial literacy is only the first step of the financial wellness equation. Once employees receive the education necessary to understand how and why they should handle their finances responsibly, then they must be coached to implement strategies that achieve financial wellbeing. In other words, helping your employees does not stop with offering financial literacy. It’s a starting point for a process that’s ongoing, and one where employees must be held accountable in some way for not only absorbing the knowledge but actually putting it into practice and reaching their goals.