The Meaning of Financial Security
Feeling financially secure encompasses various aspects such as peace of mind about your financial situation, earning enough to cover bills and save for the future, or having resources to manage unexpected expenses. A CNBC survey of U.S. adults reveals that the most common elements of financial security include having no outstanding debts (59%), maintaining high levels of savings (47%), and owning a home (45%).
Enhancing your financial knowledge can significantly boost your sense of financial security, according to experts from the CNBC Global Financial Wellness Advisory Board.
Survey Insights on Financial Stress
In CNBC’s International Your Money Financial Security Survey, 70% of the 498 U.S. respondents reported feeling “very” or “somewhat” stressed about their personal finances. Conducted by SurveyMonkey, the poll highlights that top stress factors include inflation (65%), economic instability (35%), and high interest rates (27%). Additionally, personal issues like lack of savings (44%), credit card debt (26%), and job loss or income reduction (16%) contribute to this stress.
As part of National Financial Literacy Month, CNBC will share stories to help individuals manage, grow, and protect their money, aiming to empower them to live ambitiously.
The Power of Financial Literacy
Members of the CNBC Global Financial Wellness Advisory Board emphasize that improving financial literacy can empower individuals to achieve financial security, especially during tough economic times. Annamaria Lusardi, founder of the Global Financial Literacy Excellence Center (GFLEC), compares financial education to swimming: “It’s a crucial skill, especially during turbulent times.”
Laura Levine, president of the Jump$tart Coalition for Personal Financial Literacy, notes that financial security means different things to different people at various life stages. For some, it might mean simply having an emergency fund, which can significantly reduce financial stress.
Achieving Financial Security
According to the CNBC survey, 44% of U.S. respondents believe spending less than you earn is the most critical aspect of financial security, followed by having a steady, well-paid job (29%). Understanding that financial security is a personal goal that doesn’t necessarily require significant income or assets can help you feel more secure.
Billy J. Hensley, president and CEO of the National Endowment for Financial Education (NEFE), points out that even having a small emergency fund can provide a sense of security and reduce stress.
Enhancing Financial Knowledge
Studies show that financial literacy improves financial outcomes. The TIAA Institute-GFLEC Personal Finance Index reveals that individuals with higher financial literacy scores are less likely to struggle with monthly expenses or lack emergency savings.
NEFE’s Hensley highlights that newfound financial knowledge quickly translates into practical decisions, boosting confidence and motivation.
Three Steps to Financial Security
- Talk About Money: Discussing money with friends and family can alleviate stress and provide support. Yanely Espinal from Next Gen Personal Finance encourages open conversations to break the taboo around money struggles and goals.
- Seek Advice: Financial literacy doesn’t mean you have to know everything. Understanding when to seek help from a financial advisor or counselor can enhance your knowledge and progress towards your goals, suggests Levine.
- Make a Plan: Mapping out a strategy to use your financial knowledge can create a sense of security. Espinal advises setting a timeline and employing strategies to pay off debt, which can boost confidence even before achieving the final goal.
By improving financial literacy and implementing these steps, you can work towards a more secure and stress-free financial future.