‘Financial wellness’ a challenge for many Americans, study finds  

While more than 9 in 10 Americans (93%) view financial wellness as important, nearly half report they do not feel financially stable, and nearly one-third (29%) have less than $500 in their emergency savings fund. This according to a survey from Edward Jones and Morning Consult.   

While financial wellness takes many forms, the survey revealed that most Americans define it as having no anxiety over monthly bills (61%), having enough money to take care of their family (57%) and having no debt (55%).

Experts recommend that Americans have three to six months of living expenses in an emergency-savings fund, but nearly two in five (37%) respondents expect theirs to last no more than a month – with only 38% considering their emergency savings fund to be fully funded. When asked about how they are feeling about their current emergency-savings fund, 28% of respondents feel stressed, 25% feel concerned and 25% feel anxious.

“It's perhaps unsurprising that so many Americans emphasize the importance of reaching financial wellness, especially given the turbulent times we’ve been facing, but our research reveals a huge opportunity for people to actually achieve it,” said Meagan Dow, senior strategist at Edward Jones. “Regardless of whether you have the ability to take small steps or big steps, most of us can be making progress toward building confidence and financial security, which starts with an emergency fund.”

Steps toward financial wellness

 Amid the ongoing economic uncertainty, inflation, and concerns over a possible recession, Americans are thinking about steps they need to take in order to improve their financial wellness.

Nearly half of the respondents (49%) say they will begin by paying off debt, while others plan to increase income (42%) and stick to a monthly budget (34%). To prioritize those steps, some are also delaying the timeline for bigger financial decisions and longer-term goals, including purchasing a home (16%), changing careers (11%) and even retirement (11%).

“Understandably, inflation and market conditions are forcing consumers to spend more on necessities, like groceries and housing, so their savings are falling on the priority list,” said Dow.

“When we get overwhelmed, it's easy to put off thinking about things like saving for emergencies, paying down debt, or saving for retirement,” said Dow, adding, “That's where a financial advisor can step in and help, to identify how and where you can make progress – to ensure you’re feeling secure and in control when life happens.”

Having advisor enhances confidence

According to the research, having a trusted financial advisor can play a significant role in building financial wellness.

In fact, the survey revealed that those who work with a financial advisor are more than twice as likely to feel very confident about their financial wellness as those who don't work with a financial advisor. This is 40% versus 18%, respectively.

The survey also found that 79% of those who use financial advisors have an emergency savings fund that has at least $1,000, compared to only 36% of those who do not use a financial advisor, making investors with outside counsel better prepared to weather life's ups and downs.

The survey was conducted by Morning Consult among a national sample of 2,202 adults from January 6-8, 2023.

Helping clients improve financial wellness

So, what can advisors do to help their customers feel more financially well? They can help by taking several steps, advised Alison Salka, senior vice president and director of research for LIMRA and LOMA. They can:

• Focus on the things that people are the most concerned about.
• Give their clients a formal written plan to address these issues.

About a third (32%) of U.S. consumers told LIMRA (in its January consumer sentiment survey) that they have high or somewhat high levels of stress related to household finances, Salka said. Two thirds of U.S. consumers said inflation was a major concern for them and only 19% have a very or somewhat favorable view of the U.S. economy. When it comes to long-term concerns, people are the most worried about retirement.

Consumers need to address both these short- and long-term concerns to feel financially well. Advisors are well positioned to help with both of these, Salka said. Expense budgeting is a valued service; 45% of advisors offer this service and more should consider it. This addresses the short-term issues.

For long-term issues, retirement planning is critical, Salka added. Advisors see the benefits of creating a formal retirement income plan. The top three benefits of a formal plan are a better understanding of client retirement goals and objectives, boosting client confidence in achieving their desired retirement lifestyles, and a more simplified process to discuss product solutions.

Clients with a formal written plan are also happier with their advisors than those without a formal written plan, Salka added. According to LIMRA research, 7 in 10 clients with a plan agree that their advisors understand their long-term needs, compared to half of clients without a plan. In addition, 4 in 10 clients with a formal written plan say their advisor anticipates their financial needs, while only 2 in 10 without a plan agree.

“The outcomes of formal written plans should also be encouraging to advisors,” Salka said. “Our research reveals that having a formal written plan is boosting clients’ loyalty and confidence ― a key to growing the advisor’s business. Financial wellness is foundational to overall health and wellness. Our research shows they are all related.”

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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