What is Financial Wellness?

And why is it growing in popularity?

Jump directly to a section on this page:

  1. Financial Wellness Matters
  2. All Students Need Financial Wellness
  3. Who Provides Financial Wellness Programs?
  4. How and When Is Financial Wellness Delivered to Students?
  5. What to Expect from a Financial Wellness Program
  6. Engagement and Utilization

College students are often on their own for the first time and find themselves making new financial decisions daily. With those decisions, come a number of questions.

How can they budget for food, living expenses, and tuition? What is the right amount of money to spend on entertainment? Does it make sense to take out a student loan, and if so, how much is the right amount? 

Without the right guidance, college students can easily choose a path that will lead to harsh financial consequences, affecting students for years to come.

Unfortunately, U.S. college students cannot pass even a basic financial literacy test. AIG and EverFi combined forces1 to determine how well college students understand basic personal finances by answering six questions. Here are the results:

  • Over 10 percent got no answers correct
  • About 20 percent got just one answer correct
  • Over 50 percent got two or fewer correct
  • Just 1 percent got them all right

Because of these findings, there is a push to help students understand basic personal financial concepts such as student loans, credit cards, net worth, and savings. 

However, financial literacy is only one part of the equation.

Financial wellness is based on financial literacy and the successful implementation of sound financial principles now to make intelligent financial decisions and have the capacity to live a happy life within one’s means.

Financial Wellness Matters

More than merely focusing on financial literacy, financial wellness focuses on the tools, skills, and behavioral changes needed to put information into action.

When a college student can make informed financial decisions without stress and fear, they will be well on their way to financial wellness.

Financial wellness programs can address common problems such as:

  • Student Loan Debt: The Federal Reserve reports2 that 44.7 million Americans hold $1.71 trillion in student loan debt. Sixty-nine percent of college students graduating in 2019 took out student loans and will graduate with an average debt of $29,9003.
  • Lack of Emergency Savings:  Sixty-three percent of college students4 could not come up with $500 to handle an emergency. 
  • Misusing Credit Cards: Thirty-six percent of college students5 have $1,000 or more in credit card debt. Students, like their adult counterparts, find themselves using credit cards to pay for unexpected emergencies as well as basic necessities such as food and rent.

A financial wellness program can help students understand financial concepts and then apply that information to their own lives.

For example, iGrad found that when students have at least three months of living expenses in a savings account, they feel less stressed6. 

All Students Need Financial Wellness 

There is a misconception that financial stress is limited to students who come from lower-income homes.

The truth is that financial stress impacts a majority (70 percent7) of college students. In fact, out of the top five stressors experienced by college students8, four of them are related to finances:

  • Need to repay loans
  • Cost of education
  • Borrowing money for college
  • Need to find a job after college

For a third of college students, such stressors have a negative impact on their academics and cause 74 percent of students to work at least part-time during the academic year.

Financial wellness programs are part of the answer and can help all students, even those who are financially literate. 

Who Provides Financial Wellness Programs?

Several different entities provide financial wellness programs to higher education organizations. Here are the main providers along with their strengths and weaknesses.

 

Pros

Cons

Banks

A majority of students have some sort of relationship with a bank, even if it is simply their parent’s bank. 

Programs may have a bias toward bank products and services.

Credit Unions

Nonprofit entity; more concerned with members than with profit.

Usually late to adopt programs using the latest technology.

Financial Aid Institutions

Understand the financial needs of students concerning getting an education.

Potential for biased information; may focus too much on student loans.

Financial Wellness Companies

Ability to offer unbiased information in a holistic manner. 

Depending on the delivery system, may be costly.

 

How and When Is Financial Wellness Delivered to Students?

How financial wellness programs deliver information, tools, and plans can vary. Here are four different delivery systems to consider: 

 

Pros

Cons

Digital Tools

Private, lower cost due to economies of scale, and can be individualized.

Without the right communication, students may not be aware of the program.

One-on-One (includes live chat and telephone)

Private; offers individualized information.

High cost.

Campus Workshops

Low cost, easy to advertise, and offers information to a large group of students at once.

Lack of privacy; information is less individualized.

Online Webinars

Low cost,  easy to advertise, and offers information to a large group at once.

Lack of privacy; information is less individualized.

 

Unless students are considering a student loan, can’t make the rent payment, realize that graduation is just weeks away, or have a similar issue, they are unlikely to seek out financial information. That’s why it is important to have individualized and flexible programs that offer students just-in-time education, as well as ongoing, proactive education. 

Additionally, higher education institutions should consider offering financial wellness programs as part of their student drop-out interventions.

Keep Reading: How Financial Wellness Programs Prevent College Dropouts

Student financial stress has a direct correlation to things like neglecting homework (33 percent), dropping classes (30 percent), and dropping out of school (16 percent)9. 

What to Expect from a Financial Wellness Program

Not all financial wellness programs are created equal. However, the best programs offer a wide variety of courses, tools, and assessments to help students on their path toward financial wellness.

At iGrad, we offer things like:

  • Interactive courses on topics such as budgeting, student loans, saving, and more
  • Interactive assessments such as the financial wellness checkup, financial stress assessment, and financial behavior assessment

Engagement and Utilization

Measuring student engagement will help you fine-tune the program to meet the needs of your specific students. Be sure to choose a program that offers engagement statistics regularly.

Utilization, on the other hand, speaks directly to the percentage of students that use the program. Finding an average is difficult because it depends on many things, such as:

  • The goals of the program: Some program goals address the general population of students (such as reducing financial stress) while others address a more limited population (such as understanding federal student loan repayment). This will affect the utilization rate.
  • College commitment: Colleges and universities that offer financial wellness but put few resources into the program will see about 5 percent utilization, while those that create goals, measure metrics, communicate to students, optimize their website, and offer incentives are more likely to get upwards of 70-percent utilization.
  • Offering incentives: Incentives can increase utilization by as much as seven times for an incentive offered to every student, and two times for sweepstakes-style incentives. 
  • Program communication: Creating emails with a high open rate, tying communication to existing student communications, and optimizing your website to promote financial wellness all lead to higher utilization rates.

To see how iGrad can be customized to help your college students, schedule a demo today. 

 

1 - https://www.marketwatch.com/story/more-than-half-of-college-students-fail-this-6-question-money-quiz-would-you-2019-06-05 

2 - https://www.federalreserve.gov/publications/2020-economic-well-being-of-us-households-in-2019-student-loans-other-education-debt.htm 

3 - https://studentloanhero.com/student-loan-debt-statistics/ 

4 - https://www.trelliscompany.org/wp-content/uploads/2019/06/Fall-2018-SFWS-Report.pdf 

5 - https://everfi.com/white-papers/financial-education/2019-money-matters-report/ 

6 - https://www.igradfinancialwellness.com/blog/impact-of-emergency-savings-on-financial-stress 

7 - https://news.osu.edu/70- percent-of-college-students-stressed-about-finances/ 

8 - https://www.inceptia.org/PDF/Inceptia_FinancialStress_whitepaper.pdf 

9 - https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjBuLv0u8fuAhVpkeAKHZbnDEAQFjABegQIAhAC&url=https percent3A percent2F percent2Fcssl.osu.edu percent2Fposts percent2Fdocuments percent2Fnsfws-national-descriptive-report.pdf&usg=AOvVaw0t962b6CaYXkrEx5i79r6_