Some financial “faux pas” are more serious than others.
It shouldn’t be surprising that not saving enough for retirement—or waiting too long to start saving for retirement—is among the most serious.
According to a new Financial Wellness Survey from KeyBank, financial “faux pas” related to budgeting are the most common type of money misstep, followed by savings, debt management, investing, and insuring.
“The truth is not all ‘faux pas’ are created equal,” says Chenna Cotla, Behavioral Economist in KeyBank’s Financial Wellness strategy group. “Some false steps with finances may be common, but that doesn’t mean they aren’t serious. In fact, 1 in 3 consider not saving enough/waiting too long to save for retirement to be the most severe of financial ‘faux pas.’ If not addressed promptly, such missteps can be a slippery slope.”
The survey found 75% of consumers consider themselves financially savvy, with 41% stating they’re savvier than most or consider themselves an expert when it comes to personal finance. Despite this, more than half (54%) admit they have made a financial mistake.
Additionally, among those who admit to making a savings “faux pas”:
- More than 1 in 5 admit to not contributing to retirement savings
- 1 in 3 respondents didn’t save for an emergency
- More than 1 in 4 admit to spending their tax return
“The path to financial wellness is rarely linear. Inevitably, there will be setbacks, which often present new opportunities to course correct. The important thing to remember is there are small steps you can take today—like checking your account balance—that will propel you forward to create a healthy, sustainable and resilient financial future,” Cotla said.
Interestingly, despite feeling more confident in their financial know-how, younger generations more often have budgeting issues compared to older generations. For example, 1 in 5 Millennials consider themselves a financial expert, compared to fewer than 1 in 10 Boomers. Additionally, 1 in 3 Millennials who committed budgeting “faux pas” reported feeling afraid to check their bank account, compared to 1 in 5 Gen-Xers and just 1 in 10 Boomers.
Recovery can be quick
The good news is a large majority of survey respondents who committed a financial “faux pas” (89%) feel they can recover within five years.
In fact, most people (59%) prefer to face their financial “faux pas” head on. Those who have made a financial misstep will either turn to their spouse/significant other or a family member for support (48%), investigate online resources (26%) or seek counsel from a financial advisor/banker (22%). However, 22% don’t talk to anyone because they’re either too embarrassed or aren’t sure who to talk to.
Sixty-five percent say they are most likely to take these three steps to prevent money mistakes in 2020:
- Identify and prioritize “needs” vs. “wants” (30%)
- Determine a monthly budget and revisit on a weekly basis (22%)
- Educate themselves through financial literacy courses (13%)
January is Financial Wellness Month across the country—the perfect time for people to take charge of their financial situation and avoid potential financial faux pas this year. It’s also a great time for advisors to help employers consider how they can best engage their employees to help them find the path to financial health.
- Click here to view KeyBank’s “Fixing Financial Faux Pas” infographic