Non-Financial Factors Play a Key Role in Reaching Financial Security, New Study Says

Report from Commonwealth Identifies Design Changes in the Financial System that Can Have a Significant Impact on Supporting People in Attaining Financial Security

BOSTON – A new study from Commonwealth (buildcommonwealth.org) demonstrates that non-financial factors have a significant effect on whether people can attain financial security, and these factors result largely from the financial systems they have access to and the social networks in which they live. Therefore, changes in the design of the financial system can have a significant impact on supporting people in attaining financial security.

“We’ve traditionally measured financial security in numbers: income, expenses, debt, assets,” said Commonwealth Co-Founder and Executive Director Timothy Flacke. “But in fact, these numbers don’t capture the full dynamics of people’s financial lives. Research has shown that no one intrinsically has a mastery of their finances. Instead, an individual’s emotional and tactical approach to dealing with money is built over time–in part by the financial services they can access, in part by those in their social network. ”

With the support of MetLife Foundation, Commonwealth interviewed low- and moderate-income (LMI) individuals and conducted a national survey of 1,158 people to identify non-financial factors that contribute to financial security. This research found four non-financial factors relevant to reaching financial security: a journey mindset, aspiration- and value-centered motivations, social networks, and inclusive messaging. The research also indicates that race, gender and household income are not significant factors in predicting which individuals had a journey mindset.

Key findings from the report “A New Framework for Positive Financial Futures: Money, Mindsets & Social Networks” have implications for those looking to design products, services, experiences, distribution channels or policies that will support people on their path to financial security:

• Viewing the path to financial security as a journey: People with a financial security mindset see financial security as a journey, not a transformation, and often exhibit a sense of agency, greater optimism, and more openness to change. They have often experienced a pivotal moment in their life that leads them to believe financial security can be a reality. 
• Values and aspirations: People with a financial security mindset have aspirations and values that motivate them to sustain their financial security journey, such as being driven to provide a financially secure life for people for whom they felt financially responsible (children, parents, spouse, etc.).
• Financially secure social networks: People who felt financially secure were most likely to know many people who they considered to be financially secure, while those who had never felt financially secure were most likely to respond that they did not know anyone they thought of as financially secure.
• Inclusive messaging: When inclusive messages are used, the financial security journey is open to everyone, including those who have faced systemic inequities.

“We all know that concrete factors such as financial volatility, income, assets and debt matter when it comes to financial security, but this research points to the non-financial factors that can also have an impact,” said MetLife Foundation Financial Health Strategy Lead Evelyn Stark. “This is an opportunity for those in the financial sector to focus on these human, non-financial factors and integrate empathy in product design.”

Solving for the pervasive issue of financial security requires action by employers, financial institutions, government and, ultimately, society as a whole. This means framing financial security as a journey, focusing on values and aspirations, leveraging social networks and using inclusive messaging. Reimagining a financial system that supports people on their path to financial security through intentional design, messaging and social networks is necessary to make deeper and more enduring inroads into creating financial security and opportunity for all.

For more information, or to download the full report, visit: A New Framework for Positive Financial Futures.

About Commonwealth

Commonwealth is a national nonprofit building financial security and opportunity for financially vulnerable people through innovation and partnerships to change systems. Black, Latinx and Women-led households disproportionately experience financial insecurity due in large part to longstanding, systemic racism and gender discrimination. Addressing these issues is critical to Commonwealth’s work of making wealth possible for all. For more information, visit buildcommonwealth.org.

About MetLife Foundation

At MetLife Foundation, we are committed to expanding opportunities for low- and moderate-income people around the world. We partner with nonprofit organizations and social enterprises to create financial health solutions and build stronger communities, while engaging MetLife employee volunteers to help drive impact. Our financial health work has reached more than 13.4 million low- and moderate-income individuals in 42 countries. To learn more about MetLife Foundation, visit metlife.org.