Improving the Underlying Systems That Shape Financial Decisions

*This article was sponsored by Groove, a project of the Singleton Foundation. All views and endorsements expressed in this article are solely those of the author and do not necessarily reflect the views or endorsements of the Financial Health Network.

Understanding the relationships people have with their money can be, well, complicated. Factors like upbringing, culture and past experiences play a role in shaping financial behaviors, but external factors, such as lack of access to financial education and tools, can also prevent individuals from achieving true financial well-being. Improving financial decision-making and understanding starts by providing individuals with the right tools and education provided by employers and others.  

How financial instability and stressors impact decision-making

Predatory lending practices, inflation and other circumstances all contribute to financial instability and can affect decisions people make around spending, saving and investing. Some people may never have been introduced to basic financial education, while others face challenges that can make it harder to build wealth.

Financial trauma can also play a significant role. Whether it’s growing up in financial insecurity, dealing with crushing debt, or experiencing financial abuse, many individuals are caught in cycles of anxiety and stress. A recent survey by Experian found that 68% of adults had suffered or were currently suffering from financial trauma. Some 65% of respondents said they had flashbacks or anxiety about money, and 51% said their families never spoke about money when they were growing up. This isn’t just an individual issue; it has ripple effects that impact families, communities and workplaces.

As a result, our financial decisions are often made up of a combination of personal values, learned behaviors and external circumstances that are anything but simple.

Start at the Employer Level

More and more, workers are looking to employers to provide helpful benefits that are more than what has typically been offered — especially when it comes to financial wellness. 

A recent report by PwC found that 56% of employees who are distracted by their finances at work say they spend three or more working hours each week thinking about or dealing with issues related to their personal finances. With finances being the No. 1 cause of stress among individuals, this quickly eats into an employer’s bottom line. 

By providing financial wellness tools and education, a company can empower employees to make better choices about their finances, regardless of how much they earn or what their background is. 

Traditional approaches to financial wellness often miss the mark by focusing solely on offering financial products, like retirement savings plans. Instead, companies need to focus on creating systems that make it easier for employees to make financial decisions that align with their financial goals. Providing accessible financial education and resources that meet employees where they are can have a lasting impact.

Employers can also help by addressing structural issues within the system. Behavioral economics offers us insight into how financial decisions are often shaped by factors in the decision-making environment, such as which option is the default. For example, workers who are automatically enrolled in retirement savings plans tend to save more than those who must opt in. Similarly, people are better able to make decisions for the long term when their environment encourages and simplifies these choices.

These kinds of changes, coupled with financial wellness tools and education, can help employees become more confident with regards to their financial decisions while also creating a more proactive environment for saving. 

Provide tools and education to bolster financial confidence

Greater involvement on the employer side is only one part of the solution, because financial decisions are rarely simple. Behavioral science tells us that people are also heavily influenced by social norms and what they see around them. 

Conspicuous consumption – such as buying the latest gadgets or going on expensive vacations – is visible, while financial decisions, like saving and investing, are often invisible. It’s difficult to prioritize long-term financial goals when the short-term rewards of spending are immediate and gratifying.

This is where platforms like Groove, a personal finance tool created by the Singleton Foundation, a nonprofit looking to enhance financial literacy and wellness, can help. Rather than simply educating users about financial products, Groove focuses on breaking down the psychological barriers that hold people back. By combining the tools of behavioral economics with accessible financial literacy, Groove empowers individuals not only to understand their money but to also recognize the behaviors that influence their financial health. From budgeting and saving to investing and goal setting, the platform helps users develop healthier financial habits in a way that acknowledges their unique circumstances.

“Money is fungible,” says Mariel Beasley, an applied behavioral scientist who works with the Duke University Common Cents Lab. “It can be used for anything.” “That makes it difficult for people without proper tools to make good decisions about what to do with it,” said Beasley, “and that’s why it’s so important for everyone to have accessible and accurate financial information to enhance their financial health.”