Financial health is the key to overcoming obstacles and accessing the best opportunities

Darren Easton is an authority in financial matters. At CFSI, he leads the Financial Health Network, which includes over 150 organizations, and advises member organizations on strategies to improve people’s financial health through innovative new products, services, and experiences. All of this to achieve an apparently simple mission statement: “Financial health is achieved when an individual’s day-to-day financial system functions well and increases the likelihood of financial resilience and opportunity."  To make this a reality, Easton recommends a guide for action based on the following three pillars.

Financial behavior

People are considered financially healthy if their financial behavior allows them to access the best opportunities and improve their lives. Easton summarizes the actions that reflect appropriate financial health with “having a savings account for emergencies, knowing how much savings is needed for retirement, speaking with a financial adviser, using a budget or other plan to monitor expenses and using automatic transfers to put money in a savings account.”

Demographic characteristics

There are factors like age, income, education, employment status, gender or race that can influence a person’s finances. However, this expert turns some of these prejudices on their head with surprising figures. “It is impossible to predict someone’s financial health based solely on demographic data. In U.S., 15 percent of those with a household income under $60,000 are financially healthy, and 50 percent of those with a household income of at least $100,000 are surviving or financially vulnerable.”.

Social trends

Financial health is also determined by a series of powerful social trends that go far beyond an individual’s control. One of them is the influence of a person’s place of origin. “U.S. citizens who have had a hard time growing financially are currently less likely to be financially healthy than those who have not had financial problems.” Another is that rising prices make it difficult to cover basic needs: “Those who have had to fight to pay for a home, food and medical care are less likely to be financially healthy and more likely to be stressed in this regard than those who are not fighting to pay for basic necessities.” And finally, there is job instability, which affects employees’ financial health, especially middle-income employees, although they do have advantages: “This group has benefits such as healthcare and paid vacation.”

Given this situation of financial instability, strategies are needed to help people improve their lives. “Lawmakers and those in charge of financial services, housing, healthcare, education and employment can play an important role in improving the financial health of U.S. citizens,” explains Easton. “At CFSI we intend to support these institutions, providing them the tools, resources and knowledge they need to make a significant difference in people’s lives.”

The role of banks

CFSI places special emphasis on the role of financial institutions and offers them tools they can use to advise and support people. “We launched the CFSI Financial Health Score™ Toolkit, a resource to help financial services providers diagnose, track and improve their customers’ financial health.” However, apart from using these tools, it’s also important to change mindsets. “Focusing an organization on improving consumers’ financial health is a change in corporate philosophy,” explains Easton. The benefits go in two directions: “Customers who feel that their bank cares about their financial well-being are much more likely to be completely committed to it, which leads to better results for the bank.” The behavior of people and financial institutions is essential to keeping the balance. “Products, services and financial practices, as well as consumers’ behaviors can increase or decrease an individual’s ability to spend, save, apply for a loan, and plan in a way that improves their financial health.”

Despite the importance of financial health, it is still important to raise awareness of this. For Easton, the financial sector has a lot to do, but also a lot to gain in this regard. “Designing products, services and solutions to improve customers’ financial health would make it possible to serve them better, bring in new businesses and lay the foundation for profitable long-term growth.”

A common approach

Darren Easton joins the Center for Financial Education and Capability’s Advisory Council full of excitement, knowing that his work has a lot in common with that of the center. “The Center’s approach to inclusion and innovation are also at the heart of CFSI’s mission.” In this new professional role he hopes to contribute his vision, which has many similarities with the Center’s. “Without an inclusive and dynamic financial services industry, people can miss out on new technologies and products. This is especially important for low and moderate income people  for whom these advances can be the most beneficial. These are the reasons why CFSI is happy to help advise the Center to achieve its mission.”