Financial wellness is a state of financial well-being in which you can manage your bills and expenses, pay your debts, weather unexpected financial emergencies, and plan for long-term financial goals such as building college funds and saving for retirement. It is the ability to lead a successful financial life, which includes having financial security and financial freedom of choice, in the present and when considering the future. Financial wellness is not the same as financial literacy, although financial literacy can help you build your financial wellness. Financial wellness involves all of an individual’s feelings with regard to money, and it encompasses more than an individual’s financial knowledge.
The four elements of financial wellness are having control over day-to-day and month-to-month finances, having the capacity to absorb a financial shock, being on track to meet your financial goals, and having financial freedom to make choices to enjoy life. Practicing financial wellness means learning how to build a budget, use debt, save enough, invest properly, and use insurance. It means incorporating these skills in your life to improve your overall quality of life.
Financial wellness is important not only for individuals but also for employers. Financial wellness programs have become increasingly popular as a form of employee benefit offerings since 2011. Prudential has identified three pillars of financial wellness that can help anyone improve their financial well-being: managing day-to-day finances, protecting against key financial risks, and achieving long-term financial goals.
