Financial Discipline: Not Just for Those Living Paycheck to Paycheck
For the past few weeks, we have been blogging about the very important topics of financial literacy, budgeting, and money management. We dove into some of these topics in detail and uncovered some very eye-opening statistics in the process. As I thought about our posts and reflected on the other commentary contributed by others over the course of Financial Literacy Month, I was struck by just how much our society needs help with financial discipline. This topic – financial discipline – is often discussed in the context of those who don’t have sizable incomes. And why not? It makes perfect sense that those living paycheck to paycheck needs to closely watch their finances and budget. And they do. But the need transcends this segment of the population.
People need to apply financial discipline to their lives for different reasons. And these reasons change over the course of a person’s life. Part of the challenge for providers of financial services is to provide guidance and tools that are tuned into these reasons. It all goes back to the core goal of meeting a customer’s need. So let’s take a look at some segments that have real needs for financial discipline that don’t necessarily fit into the low-income consumer stereotype.
Let’s consider the case of a teenage girl who lives in a household making three or more times the median household income. While her parents have the means to let her buy most of what she wants, they like the idea of giving her a companion card with a pre-set amount of spending money so she can learn to make good purchase decisions and manage money responsibly. But they also know that she can be impulsive, especially around her friends. So they set up parameters around the companion card to limit purchase amounts and restrict certain retailers, and they also configured mobile text alerts to keep her on track (and themselves informed of what she is buying and when).
Younger Couples & Parents From the Middle Class
This is the segment of the population that is working hard to chart out its own livelihood and/or give its children a good education. The case of a twenty-something newlywed couple is a good example. They want to buy their first home, but with most lenders requiring 20% down and median home prices in their desired area hovering around $450,000, that’s about $100,000 after closing costs that they need to shell out. Or about $90,000 more than they have saved currently. They make decent money but need financial discipline to get their dream home. Older middle-class couples with children typically need financial discipline to save for college. Whatever the motivation, middle-class families often have a huge need for financial management advice and budgeting tools to set and attain savings goals.
An interesting case study for financial discipline – and one that is not often discussed – is senior citizens. Many grew up in an era when saving money was a primary focus, or at least had parents that instilled in them the need for financial security. As a result, many have very comfortable nest eggs. The problem is that many are taken advantage of by scammers or are failing mentally and need help managing their finances. One of our clients, TrueLink Financial, has actually developed a great tool for helping seniors protect their finances. Transaction alerts to family members and other configurable limits set up around their accounts help provide discipline and protection to this segment of the population.
Can you think of any others that buck the stereotype discussed earlier? Please share them with us and let us know how the financial services community can help meet their needs with financial discipline tools.