Financial education: what’s your profile?

Each person has habits related to their way of spend and saving money and these are closely related to their level of financial education.

Some are used to saving from a young age, keeping track of their expenses and being thrifty, while others, not used to putting money aside, often end up spending more than they can afford.

To investigate people’s spending habits, and therefore savings habits in a complementary way, and measure their level of financial education, N26 online bank involved Alice Tapper, financial activist, certified debt advisor and founder of the financial education platform Go Fund Yourself in an interesting project.

Alice Tapper interviewed over 1,000 people about their financial habits, investigating their needs, but also their fears, thus managing to outline the most common six different financial profiles.

It is therefore interesting to ask which of the categories outlined by Tapper one belongs to for greater awareness about one’s level of financial education.

Financial education: tell me how you spend and I’ll tell you who you are

There are many ways to spend one’s money: wisely, inattentively or with simple superficiality.

There are, therefore, six financial personalities that encompass the most common financial behaviors.

Here’s what they are.

• The strategist: loves planning, the strategist keeps all his finances under control so as to be ready at any time to face any unexpected events. Not only that: if you know a strategist, you know who to contact if you have any doubts about an investment.

• The thrifty: a thrifty ia a person very oriented towards the essentials, who relies on great self-control. He doesn’t like to spend his money rashly, he is able to postpone unnecessary expenses, even for a long time, he loves to be informed about all possible opportunities to save money, from sales to special offers, from the cheapest shops to those with the best value for money.

• The hedonist: "Money is made to be spent", if the hedonist could be defined with one motto, this would probably be it. The person with this financial profile likes to spend their money on the things they enjoy, often even more than they can actually afford. The main risk that a hedonist can incur is that of getting into debt.

• The detached: This financial profile doesn’t like to talk about money for the simple reason that he doesn’t care. For the detached person, money "is just money" and should therefore not be a source of concern. Those in this profile care much more about having meaningful experiences and living up to their values. The rest, even the money, doesn’t count.

• The ambitious: people with behaviors related to this profile are lovers of money and always want to earn more. For those who are financially ambitious, success in achieving their goals represents a profound source of pride: they are ready to take any step to obtain it. Without delving into the terrain of petty psychology, often the desire of the ambitious to increase their wealth can be traced back to economic shortcomings experienced at a young age.

• The independent: those who belong to this financial profile have the characteristic of being farsighted, of investing in their future. It is the profile of someone who can have the impetus to create something that does not exist. The independent often saves not for the simple sake of doing so, but with the aim of achieving a greater goal, such as quitting work early, perhaps by founding their own startup and then selling it.

Each of these profiles has its own strong points and weak points and they are certainly not an immutable structure: people often identify with more than one personality and behaviors can change over the course of the life, on the basis of the experiences one has and the people one meets, but above all on the level of financial education one reaches.

However, trying to identify with one of the profiles mentioned can help to gain greater awareness of one’s relationship with money, between spending and saving, so as to be able to activate behaviors and acquire knowledge to improve it.

Financial education: how to break bad habits

According to Alice Tapper, "no profile is good or bad at all. Instead of labeling different financial personalities as ’good, ’bad, ’better’ or ’worst’, it is more constructive to work with your specific characteristics, recognize the benefits of own profile and evaluate which habits you want to change and unlearn".

Identifying yourself in one of the profiles can help you identify those financial habits that you want to change.

Once you understand this, the best way to change is to set yourself some objectives: if, for example, until last year you only managed to save 200 euros a month, this year you could try to put set aside at least 300, and then start investing gradually.

After taking the first steps, you need to start monitoring your goals. In fact, keeping the situation under control allows you to have greater awareness of what you are doing.

Furthermore, saving shouldn’t be a burden, but a satisfaction, it is therefore advisable to celebrate the goals you reach with your loved ones, so as to also be stimulated to do better.

Finally, if you don’t reach your goals, be indulgent with yourself: it may happen that you are unable to put aside the same amount every month due to an unexpected expense.

However, it is essential don’t give up and analyze what happened as analytically as possible and remedy where possible.

Is saving a gender issue?

Have you ever wondered who saves the most between men and women?
According to a research carried out by the online bank N26, women have been more able than men to save in the last period, despite a salary that is lower on average.
In fact, the salary gap between men and women remains large: there is still a 23% gap in favor of men.

However, it is also necessary to underline that women’s ability to save decreased in the second half of 2022: during the first six months, women were able to save on average 2% of their monthly income, while in the last six months only 1%.

Albeit slightly, this percentage is still higher than that of men who, in the second half of 2022, saved on average a figure very close to 0%, therefore practically nothing.

Financial education as the key to change

The profiles drawn by Alice Tapper have one thing in common: they are the product of a complex mix of influences. "For most of us, financial habits are the result of our culture and education, the people we surround ourselves with, religious beliefs and the media we use to inform ourselves", explains the expert.

While any financial profile can learn to improve their knowledgeable, intelligent and effective money management skills, for some it may be easier than for others.

"It is possible that profiles such as the ambitious, the strategist and the thrifty are more aware of the importance of financial literacy and the value of a thorough understanding of how to manage one’s savings. Others, however, such as the hedonist and the detached, they may find it difficult, tiring or even boring to figure out how to best manage their finances,” says Alice Tapper.

"However, once the understanding process has begun and after having successfully applied some of the notions learned, it may be easier for any profile to experience the benefits of financial education first-hand, such as avoiding debt or the ability to build healthy spending habits and reduce anxiety about money".

Original article published on Money.it Italy 2023-04-26 08:00:00. Original title: Educazione finanziaria: tu di che profilo sei?