Money Stress or Mindfulness?

Financial wellbeing plays a very large role in people’s mental health. Sadly, money matters are one of the major causes of mental stress.

Recent Research by the Global Financial literacy excellence centre (GFLEC) shows how financial wellbeing is dependant on financial literacy, defined as the knowledge and understanding of money that enable sound decision making and effective management of personal finances. In terms of knowledge and understanding of money the key elements are: understanding compound interest, understanding inflation, and understanding risk and diversification.

According to the 2022 Personal Financial Index survey in the U.S., compared to those with very high levels of financial literacy, those with very low levels are:

• 6 times more likely to struggle making ends meet
• 3 times more likely to be constrained by debt
• 3 times more likely to be unable to cope with a $2,000 financial shock
• 5 times more likely to lack emergency savings sufficient to cover one month of living expenses, 
• 4 times more likely to spend ten hours or more per week dealing with personal finance issues.

Let's pause to take that in: 10 hours or more per week dealing with - and worrying about - money matters means approximately 90 minutes a day! The burden of money stress is much higher than we think, affecting deeply our daily lives.

Who is affected by low financial literacy? 

Well, it seams that the distribution is quite even across ethnicities and across generations, With a nuance: young adults are those who seem to have the lowest levels of financial literacy. 

The average percentage of P-Fin Index questions answered correctly in 2022 by Gen Z and Gen Y is 42% and 46%, respectively, versus 54% for baby boomers and the Silent Generation. 

So the problem seems to be worse for young adults. I would argue that in life, many people learn the hard way. What concerns me is that the situation is not improving - this despite the fact that young people have never had more information and education opportunities at their fingertips.

Why is this happening?

• Financial institutions are not investing in children’s financial literacy because they don’t make money on kids’ offerings. And they make more money when people take on debt. 
• Financial literacy is not taught sufficiently (if at all) in schools, and certainly not at the right age
• Even if schools did, it would only partially address the root causes of this problem.
• Parents who lack financial literacy themselves are often unable to help their kids to develop good money habits
• Digitisation is shifting our children’s attitudes towards money without most people realising just how deeply they are affected

How can we improve the situation?

Beyond financial literacy strictly speaking, there are 3 main behaviours that determine financial well-being: active saving, spending restraints, and not borrowing for daily expenses. So this sounds easy, right? Only 3 things to do to improve your financial wellbeing and mental health.

Yet the hurdles are many:

• Digitisation of money has made saving both easier and yet much more difficult.
• Social media has made displays of lifestyle the norm.
• Online shopping with buy-now-pay-later is facilitating further consumer debt.

Changing behaviours is hard. Research indicates it takes at least 60 repetitions for new habits to form - and it is so easy to fall back into old patterns without the right support and reinforcement of new behaviours.

We have seen the development of mindfulness apps for our nutrition, for our physical exercise, for our mental health overall - but there is little to helps us to be more mindful every day with our money.

My mission is to enable the next generation to grow up with the financial literacy foundations they will need for life. My aim is to give parents the tools to become their children’s BEST money and sustainability role models - setting a strong financial foundation for their children in early childhood. This is why I have developed the world’s first financial parenting masterclass that offers parents everything they need to raise money smart kids (ages 3-10y) in 8 easy steps, launching on 28.10.2022.

I believe that improving financial parenting is an untapped opportunity for every family, for every child and for the economy as a whole. In Switzerland, the population's average financial literacy is 57% (according to the GFLEC report on financial literacy worldwide) ranking 14th, well below the levels of the leading countries in the world (71%). The upside is material. The opportunity is huge.

And the impact is what matters most: when we educate kids on money and sustainability, we empower them to make ALL their daily money decisions a force for good.