People living on low to moderate incomes (LMI) face uncertainty—now more than ever, given the outbreak of COVID-19 in the U.S. The financial, or material, factors that affect people’s financial security are well-researched, but what of their mindsets? In order to enable financial security, and ultimately wealth creation, we’ve set out to better understand how people think about their financial situation, and the interplay between material factors and these mindsets.

Financial insecurity is both a state of being financially unstable and a state of mind: feeling worried, uncertain, and anxious. There has been significant research into the material factors that contribute to financial insecurity (e.g., volatile income and expenses, debt, lack of savings), but little on the factors influencing mindsets.

Over the last several weeks, the COVID-19 crisis has upended the economy, and with it, people’s lives. For people living on LMI, especially lower-wage and hourly workers, a difficult reality just became even more challenging. During this time, understanding the role of mindsets—around personal agency, pathways, and aspirations, for example—will be critical to developing solutions that help people emerge from this crisis better-positioned for a path leading to financial security and opportunity.

How Do People Perceive Financial Security?

Last year, Commonwealth worked with the market research firm Olson Zaltman to gain a deeper understanding of the unconscious thoughts and feelings people have about becoming financially secure. We conducted an in-depth qualitative study using the Zaltman Metaphor Elicitation Technique (ZMETⓇ), a research technique that harnesses imagery and metaphors to probe people’s unconscious feelings on a subject. The study revealed that people’s perceptions of their financial situation are complex and often surprising—and that a “financial security mindset” may be key to taking steps toward financial security in the midst of significant challenges.

We interviewed 20 people, half who self-identified as “financially comfortable” and half as “financially struggling.” We collected information about their financial status and found that there was little disparity in income between groups. This unexpected finding suggests that two people can have a similar income, but different perceptions of their financial situation—and potentially, different paths to financial security and wealth-building based on their mindset.

Participants collected and brought to the interview five to seven images representing their thoughts and feelings about becoming financially secure. During interviews, participants’ images acted as tools to facilitate the vocalization of deeply-held personal feelings and unconscious thoughts about financial security. Analysis of the interviews identified a number of factors that may contribute to a mindset of financial stability.

A Financial Security Mindset

What our experience at Commonwealth has long suggested, and the results of this research study support, is that a solution that addresses a financial challenge should also support users in having a “financial security mindset.” Key elements of this mindset include:

Pathways—Perceiving Financial Stability as a Journey
Self-identified financially comfortable participants perceived their path to stability as a journey, with steps and obstacles that eventually lead to a positive outcome. They were more receptive to making changes to “get on the path” during disruptive moments in their lives, such as a new life stage, a “rock bottom” experience, or when assuming a new financial responsibility.

Strong Sense of Personal Agency
Financially comfortable participants exhibited an internal locus of control, attributing their financial situation to their own actions. They saw themselves in a constant fight for the future: actively managing finances through detailed budget strategies, taking advantage of traditional financial resources, and valuing small victories to stay motivated. They saw themselves as the heroes of their own stories.

Attainable Aspirations
For financially comfortable participants, the path to stability was motivated by a fulfillment of emotional needs rather than material wants. This frame of mind enabled them to focus on goals and aspirations, driving them to take action to change their financial situation. As future-focused, they build for tomorrow, differentiating a more realistic, attainable financial stability from an idealistic financial freedom.

Next Steps

In the next year, we will continue to explore the role of mindsets in the lives of people living on lower incomes—particularly their sense of hope, agency, aspiration, and pathways. Our team will use a combination of additional primary research and real-world testing to validate our initial research findings. We will explore how insights can be applied to addressing financial challenges and testing which financial behaviors, conditions, and design features would support the financial security mindset.

In light of COVID-19, this work has far-reaching implications—are people’s mindsets being impacted? If so, how? This deepened understanding of mindsets will help inform the design of innovative tools to support people living on LMI in starting, restarting, and maintaining progress on their journeys to financial security.

For more information on the role of mindsets in achieving financial security and enabling wealth creation, contact Becca Smith at bsmith@buildcommonwealth.org.

The Making Wealth Common: Extending Financial Opportunity project is made possible thanks to the generous support of the MetLife Foundation.