Why is financial well-being so important for a society?
In this interview we talk to Prof. Dr Johannes Treu, Professor of General Business Administration and Economics at IU International University of Applied Sciences, about financial well-being.
Especially in a world marked by global crises and economic uncertainty, the topic of financial well-being is becoming increasingly important. But what does this term actually mean, and why is it so important for society?
Prof. Dr Johannes Treu
Professor of General Business Administration and Economics at IU International University of Applied Sciences
Professor Treu, is “financial well-being” just about your bank balance – or is there more to it than that?
There’s absolutely more to it! Financial well-being is much more than just a number in your bank account. It describes the feeling of being satisfied and secure with one’s own financial situation – without having to constantly worry about bills or the future. Incidentally, it is possible to have a high income and still feel insecure if you lack control. Conversely, someone with a lower income may be in a good financial position because they have their finances under control and are able to build up reserves.
That suggests that financial well-being is closely linked to mental health.
Yes, the two are closely linked. Financial worries are a significant stress factor that can even trigger depression or anxiety disorders.
Conversely, having a stable financial footing can strengthen mental well-being by providing a sense of security and control. Knowing that we can provide for ourselves and our family gives us inner peace – and that is a basic human need!
“An economically resilient society is also a stable society.”
Why is financial resilience so crucial, especially in these times of inflation and weak economic growth?
In a sense, financial resilience forms the material basis for financial well-being. It describes the ability to cushion unexpected financial shocks, such as a broken washing machine, rising utility costs or job loss. Those who have savings do not immediately end up in financial difficulties, but can weather crises without jeopardising their livelihood.
This buffer is particularly important during periods of inflation and weak economic growth, as rising prices erode incomes and savings, and uncertain labour markets increase the risk of income loss. From an economic perspective, financially resilient households actually stabilise the economy as a whole, as they are more able to maintain their consumption levels. They contribute to demand and thus reduce the risk of financial shocks having a greater impact on the real economy. After all, an economically resilient society is also a stable society.
The IU study looked at the different generations. How does the financial well-being of the different age groups compare?
The results paint a clear, but in some cases surprising, picture: baby boomers are the most relaxed about their finances, as many of them are already well provided for. Security is their main priority.
Generation Z is an exciting phenomenon: although they are growing up in an uncertain environment characterised by inflation and high housing costs, they show a great deal of hope and confidence. This is a surprisingly positive result given the ever-increasing uncertainty in geopolitics and the global economy.
But younger people can sometimes hinder their own progress, for example through impulse spending or failing to keep track of their own finances.
This demonstrates the strong desire for stability, but achieving it poses considerable challenges, particularly for the younger generation.
“Financial literacy should be promoted in the family home, at school and in every workplace.”
What can society do to improve financial well-being?
Financial education is a civic duty – for everyone. Young people in particular not only need theoretical knowledge, but also concrete tools for managing their money independently. Financial service providers must finally break out of their technical jargon and offer understandable solutions. And society must stop treating money as a taboo subject. Financial literacy should be promoted in the family home, at school and in every workplace. Those who remain financially illiterate become dependent – and as a society, we cannot afford that.
Is financial well-being, therefore, a kind of economic driver?
Financial well-being is definitely an economic driver. Those who feel financially secure invest more boldly – whether in education, home ownership or new business ideas. These people drive consumption and innovation, strengthen the domestic economy and may even create jobs. Ultimately, everyone benefits from a financially secure, resilient society. That is why financial stability is not a private matter, but something that concerns us all.
