How financial literacy boosts wellbeing

People who are financially literate often have many advantages. They may be able to make better investing decisions, which can lead to better outcomes in the long run or avoid debt traps. 

But being financially literate isn’t just a good thing for your bank account. It can also make a big difference to your overall wellbeing. 

Here are a few of the ways that boosting your financial literacy can leave you better off in a more holistic sense. 

Mental health 

One of the biggest advantages that comes with financial literacy is a mental health boost.  

Having the confidence to manage money issues means you are less likely to be overwhelmed by financial problems – and more likely to know how to deal with them if they arise. Studies have shown a link between mental disorders and low household incomes – and a drop in household income was found to be linked to problems such as substance abuse and anxiety disorders. 
New Zealand research has also shown that worries about money can reduce productivity at work. Being financially literate and having your money life in order helps to eliminate a significant potential source of stress. 

Proactive rather than reactive decisions 

People who are financially literate are often in a better position to be able to make better decisions about their money lives. As this Financial Markets Authority report shows, a lack of financial literacy was behind some KiwiSaver members’ decision to switch from a growth fund to a conservative one when markets dipped in 2020, which locked in losses. Someone with a plan and understanding of the risk of their investments, by contrast, should have been able to ride out the volatility with less impact. 

Boost career 

Being confident dealing with financial issues can also be a benefit in the workplace. Being able to make good money decisions – and, in turn, business decisions - can be an asset in a range of jobs. This article from Harvard Business School outlines that the US Bureau of Labor Statistics expects demand for finance skills to increase by 16% by 2028, indicating that financial literacy skills are likely to give any would-be job applicants a competitive edge. 

Confidence to achieve goals 

People who are not financially literate may decide it’s not worth aiming for big goals, because they’re not sure how to get there. But building wealth usually starts with a plan, and financially literate people have the building blocks to set up a pathway to success. Even if they do not necessarily earn more, someone who knows how to use money effectively is likely to be better off over the long term. 

It can help a community 

Financial literacy can be catching. Research has shown that when people start to have conversations about money decisions and spread information, their neighbours and friends are more likely to engage with the topics and seek information. People who are confident with money are more likely to arm their kids with those skills, too. Breaking trends of generational financial illiteracy can have a profound effect on a wide range of outcomes. 

Like to talk? 

While we can’t help you plan your investment goals, we can refer you to someone who can. And remember, financial literacy extends to how you protect your ability to invest as well – and that’s where we come in. 

Our quote compare tool is a great place to start, but if you have questions or would like to discuss your unique circumstances, our friendly insurance advisers at LifeDirect are just a quick phone call (or message) away. We can help you put in place an insurance plan that’s right for your situation, so that if you’re sick or injured and not bringing in an income, you can still meet your financial obligations and maybe even save for the future.  


Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance. 

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