According to the 2021 Global Financial Well-being Report, the pandemic has left the world $19.5 Trillion deeper in debt. Now is the time when governments and social security institutions stop with the entitled rides, pushing people to own more of their financial security and wellness. The majority of people around the world lack financial education or awareness of it. 53% feel that they are financially excluded. Almost in every other country, women, middle aged group, a few minorities and ethnic groups feel the most excluded financially.
As per the report, only 13% of the global population has had formal financial education with Nigeria topping the charts followed by Latin America and Germany. People find the prevailing traditional education on finances insufficient and are relying on technology for upskilling and advanced knowledge on finance management.
There is a certain gap among genders, ethnic groups, races, age groups and minorities when it comes to finance management and education. The negative bias regarding pay scales, promotions, pensions can be attributed to such traditional financial education exclusion.
It is a given that that has to change. Financial education and money management are the needs of the hour. As people, our financial drives stem from and are influenced by technology, family, and our behaviour.
Technology dilutes the financial inclusion experience
45% of the population relies on technology to educate themselves financially. But financial education should be taught in school. Even within schools that are educating students on financial maturity, there is a marked difference between access to that education between blacks and whites, men and women. 21% of richer households have access to financial education in school, compared to only 14% of low-income households. 15% of white Americans receive financial education in school – compared to 14% Asian Americans, 13% Black Americans, 6% Native Americans.
Choosing between family, self elected influencers on social media and online financial advice are the only options available to most of the population.
A major chunk of the population (74%) still relies on their family and friends to learn tips on money management.
Reportedly, more women than men receive or are dependent on their family for financial education and money management. People in countries like Japan, Spain, India are more likely to inherit financial education and money from their families due to strong values and cultural bonds. There is great uncertainty on people's wealth distribution. Employees, mostly in APAC and the European region, spend a significant part of their salaries on others and families. Data shows, companies and employers are unaware of how employees distribute their incomes, making it difficult to formulate and frame employee-well being strategies. Companies and organizations need to have a clearer picture on financial insights to structure and provide financial education, skills and knowledge.
Human behaviour drives financial decisions and habits
Apart from a number of people enduring financial anxiety, 55% of the population is satisfied with earning enough money to sustain bare survival and yet 60% are not proud of their finance management. Report suggests women and older people tend to live with this ideology to save enough to pay their bills, without spending on other needs such as housing and leisure. The reason for such an attitude might be the financial dependence of younger generations on their family and parents. Although, globally many say home ownership (50%), retirement (49%), their children’s futures (43%) are their personal financial goals. In order to bring financial equality and stability, organizations and companies around the globe are working on employee-well being and support. India, China and Nigeria have strengthened their financial institutions and remain at the top when it comes to rendering finance management knowledge and support to their employees.
On comparing regions, Brazil portrays the highest level of financial and mental stress, with women facing the brunt. The list is followed by Nigeria and South Africa. Financial illiteracy, exclusion and dependence are among the major causes for mental stress and anxiety among the mid-age group leading to downfall in businesses and work life. It is women (55%) who experience this more than men (51%), and generally the younger generations are more subject to this inequality.
What does the financial future look like for individuals?
Globally home ownership, retirement, and children’s futures are the personal financial goals for many. In EMEA, the biggest aspiration is owning a home, as in APAC and LATAM. In North America it’s having enough money for bills, followed by saving for retirement. Employee benefits and organizational support can also level the playing field for most. India , China, and Nigeria have the strongest belief that their employers care about their financial goals. These countries also remain in the top positions globally for financial education and communication.
As per the report financial dependence and lack of finance management knowledge is a global issue. Businesses and companies are focusing on framing comprehensive employee well-being strategies with special emphasis on finances and mental health. Due to diverse financial conditions among different groups of people, it is judicious to have a personalized approach, to eliminate financial exclusion. Financial education and management is gradually gaining momentum to eradicate mental health and monetary crises as well as to build a productive workforce globally.