Financial missteps such as excessive debt, inadequate savings, and poor credit management are alarmingly common. According to the Federal Reserve, 37% of Americans would struggle to cover a $400 emergency expense. This lack of financial preparedness creates a ripple effect, impacting not just individuals but also their communities and local economies. Financial institutions, as trusted community partners, feel the impact when customers default on loans, deplete savings, or disengage due to financial stress.

How Financial Institutions Can Help

Financial institutions are uniquely positioned to mitigate common financial mistakes. By addressing these issues directly with customers, banks and credit unions can foster a healthier financial ecosystem, driving growth while supporting their mission to improve financial literacy and economic stability in their communities. Here’s how they can make an impact:

• Providing accessible financial education through webinars, in-person workshops, or digital learning opportunities to improve financial literacy.
• Offer personalized financial guidance that equips customers with tailored financial plans to address their unique needs.
• Incentivize good financial behavior by creating reward programs for saving, debt repayment, and improved credit scores.

Spending Mistakes

• Living Beyond Ones Means: Many individuals fall into the trap of living beyond their means, often due to a lack of budgeting skills or societal pressures to maintain a certain lifestyle. This can lead to unsustainable debt and limited savings. Financial institutions can help customers stay on track by providing budgeting tools and hosting educational sessions on responsible spending habits.
• Unnecessary Spending and Impulse Purchases: Impulse purchases can quickly drain financial resources that could otherwise be allocated toward savings or paying off existing debt. These unplanned expenses often arise from emotional triggers or marketing tactics that encourage spontaneous buying. Financial institutions can help mitigate this by offering spending analysis tools that track and categorize expenses, as well as encouraging the use of budgeting apps that alert users to their spending patterns and help them make more informed decisions.
• Overlooking Small, Recurring Expenses: Small, recurring expenses, such as subscription services or daily coffee purchases, can add up significantly over time and impact overall financial health. These seemingly minor costs can go unnoticed in a monthly budget but can accumulate to a substantial amount annually. By promoting tools that track and highlight these recurring costs, institutions can help customers make more conscious spending choices and improve their financial stability.

Credit & Debt Mistakes

• Credit Card Management Errors: High interest rates and unchecked spending can lead to mounting credit card debt. Many individuals fall into the trap of making only minimum payments, which prolongs the debt repayment period and increases the total interest paid. Financial institutions can introduce credit management workshops that educate customers on effective strategies for managing credit card debt, such as prioritizing high-interest debt and exploring balance transfer options.
• Misunderstanding Credit Score Impact: Many customers are unaware of how their credit score can limit financial opportunities, such as obtaining loans, securing favorable interest rates, or even renting an apartment. Financial institutions can play a crucial role in educating customers about the factors that influence their credit scores by offering tools to track credit score improvement and providing personalized advice on how to boost them.
• Ignoring Debt Repayment Strategies: Ignoring or delaying debt repayment can lead to increased financial stress and a cycle of accumulating interest and fees. Financial institutions can assist by helping customers prioritize their debts based on interest rates or balances and providing resources such as debt calculators and personalized repayment schedules.

Investment & Savings Mistakes

• Retirement Planning Oversights: Delaying retirement savings significantly impacts long-term financial stability. Many individuals underestimate the importance of starting early and fail to take advantage of employer-sponsored retirement plans or individual retirement accounts (IRAs). Financial institutions can emphasize the benefits of early saving by offering interactive retirement calculators that illustrate potential growth over time.
• Savings Account Optimization: Many customers miss out on higher yields by not exploring optimized savings options, such as high-yield savings accounts, certificates of deposit (CDs), or money market accounts. These accounts often offer better interest rates compared to traditional savings accounts, allowing customers to grow their savings more effectively. Financial institutions can promote these options by highlighting their benefits and providing tools that compare different savings products.
• Neglecting Emergency Funds: Failing to establish an emergency fund can leave individuals vulnerable to unexpected expenses, such as medical bills, car repairs, or job loss, leading to increased debt. Financial institutions can stress the importance of having an emergency fund by offering step-by-step guides on how to build one and providing tools that help customers calculate their ideal emergency fund target based on their unique budget and expenses.

Repay Debt and Build Emergency Savings with EVERFI Achieve

Financial institutions can be a trusted resource in helping their customers understand exactly where they stand financially. EVERFI Achieve’s new Debt Repayment Strategy Learner Pathway offers a structured approach to developing a customized debt repayment plan by calculating total debt balance, interest rates, and minimum monthly payments. Further, Achieve’s Emergency Savings Learner Pathway offers customers a step-by-step guide to building an emergency savings plan and learning how to save money through savings accounts. The Emergency Fund Tool helps users calculate a target based on their unique budget. Financial institutions leveraging EVERFI Achieve not only provide a valuable resource but also reinforce their role as community allies in fostering financial health.

Take the first step towards empowering your community by scheduling a demo to see how EVERFI Achieve can transform your financial literacy programs.