Financial wellness is more than just budgeting or saving money each month, it’s about creating a plan that supports your long-term financial goals and peace of mind. As we observe Financial Wellness Month this January, it’s the perfect time to explore what financial wellness truly means and why it matters for your future.

“Financial wellness means having a solid financial plan as your foundation and knowing every night that you’re making the right financial decisions for yourself,” Anita Wheetley, Vice President and Wealth Advisor at Cogent Private Wealth. “The more you understand your financial situation, the better decisions you can make.”

A survey of Generation X (born 1965–1980) by the Certified Financial Planner Board of Standards found several wish they had started retirement planning earlier – many simply thought they had more time to save for retirement. Only 37% were satisfied with their retirement savings, and less than 40% had achieved their financial goals. This lack of planning cost them a median of nearly $100,000.

According to the 2024 Consumer Financial Protection Bureau report, approximately 40% of Americans demonstrate high financial literacy, which includes understanding saving, budgeting, managing debt, and investing. This leaves quite a gap with 60% who are unsure, uninformed, or in need of more information regarding financial wellness. Financial literacy strongly correlates with financial well-being, and higher-income households tend to have greater financial knowledge.

Financial Literacy Across Generations

It is interesting to look at financial literacy and how it varies among generations, each facing unique needs and challenges:

• Baby Boomers (age 61+): 55% financial literacy rate. Often focused on retirement readiness, managing healthcare costs, and estate planning.
• Generation X (ages 45-60): 50% financial literacy rate. Balancing saving for retirement with supporting children and aging parents, they face significant financial stress.
• Millennials (ages 29-44): 45% financial literacy rate. Navigating student debt, home buying, and early investing, and are still building their financial foundations.
• Generation Z (ages 18-29): 38% financial literacy rate. Entering the workforce, they are beginning to learn budgeting and investing basics.

While each generation has varying needs, they all benefit from tailored financial education and planning strategies to improve their financial wellness. It is important to consider that each generation learns differently, and what works for one group may not work for another.

Access to the right information at the right time can make a meaningful difference across all generations.

Budgeting vs. Financial Planning

While budgeting helps you track income and expenses, financial planning takes a broader, long-term view of your financial health. It includes savings strategies, tax planning, investing, and preparing for life’s uncertainties.

The 50/30/20 budgeting rule is often used to allocate income:

• 50% on needs (housing, food, utilities)
• 30% on wants (entertainment, dining out)
• 20% on savings and debt repayment

Often, the challenge lies in consistently setting aside that 20% for future goals.

“A budget is about managing spending and cutting costs where needed,” Wheetley explains. “Financial planning looks at your entire financial picture, including taxes, estate planning, insurance, and investments.”

Saving and Staying Focused – Building a Safety Net

Building and maintaining an emergency fund is a vital step on the path to financial wellness. As we all know, it is not a matter of if, but when, unexpected expenses will arise. Typically, this fund should cover three to six months of living expenses, but some individuals prefer to save up to a year’s worth of expenses for added security.

This financial cushion acts as a safety net during unexpected events such as job loss, medical emergencies, or major repairs.

Anita Wheetley emphasizes, “Savings depend on your income, expenses, and leftover funds each month. Regularly reviewing your spending habits helps maintain discipline and keeps you focused on your financial goals.” Staying committed to saving – even in small amounts – builds momentum toward long-term stability.

Achieving Your Goals and Needs

Achieving financial wellness means finding the right balance between your essential needs, discretionary wants, and your ultimate goals. Wheetley explains, “There are things you absolutely need, things you’d like to have, and aspirational goals you wish for.”

How effectively you meet these depends on your income, money management skills, and how early you begin planning. Starting your financial wellness journey early allows your investments to benefit from the power of compound interest, significantly increasing your chances of success.

Waiting until retirement age to start planning limits your options and increases stress. Wheetley advises, “Starting young – even as early as 15 – can make an enormous difference. Most people start to think about financial planning once they have graduated from college or are in their chosen career. The earlier you begin, the better your chances of meeting your goals. It is never too early to improve your financial literacy and start your journey to financial wellness.”

Jumpstart Your Financial Wellness in Your 20s

Your 20s are a pivotal decade for establishing a strong financial foundation. This period often involves major life transitions such as graduating from college, starting a career, getting married, or purchasing a car. Additionally, many Gen Zer’s are faced with managing student loan debt like never before. Developing good financial habits now can set the stage for future success.

“Young adults are flexible with spending and can benefit greatly from financial planning,” says Wheetley. “A solid plan helps you allocate contributions wisely and choose investments that align with your long-term goals.”

The primary factor young people have going for them when it comes to saving for retirement is time. When you invest, you’re earning compound interest (interest on your interest) so you’ll earn substantially more on your investments over longer periods of time than you would over shorter time frames.

While people in their 20s typically have less discretionary income to save, even a little goes a long way. For example, let’s say you invest $2,000 ($166 each month) a year from age 19 to 27 and don’t save anything again beyond that point. Assuming your investments yield an average 10% rate of return over the course of your lifetime, you’ll end up with $1 million by the time you’re 65. By comparison, if you wait until they’re 27 to start saving the same amount of money each year, you will end up with $800,000 when you reach 65. That’s a significant amount of retirement funds left on the table.

By taking control early, you can avoid common pitfalls and build a roadmap that supports your evolving financial needs.

Planning Gives You Peace of Mind

Wheetley points out that navigating your finances without a plan is like walking in the dark. Consulting with a financial advisor can flip that switch on, revealing options and strategies tailored to your unique situation.

“Having someone to discuss your financial situation and goals with provides peace of mind,” Wheetley says. “Financial wellness means knowing your actions today will lead to positive long-term results, letting you sleep well at night.”

Peace of mind is invaluable, allowing you to focus on living your life with confidence and security.

Start Your Financial Journey with Cogent Bank Today

At Cogent Bank, we help empower you on your path to financial wellness. Whether you’re seeking savings and checking accounts, budgeting tools, or expert financial advice and planning, we provide the resources and personalized support to help you succeed.

Take control of your financial future today. Reach out to build a customized plan that aligns with your goals and unlocks lasting peace of mind. Your prosperous future starts here.

Disclaimer: The information contained herein is for informational/educational purposes only. The views and opinions expressed in this document may be those of the individuals and may not necessarily reflect those of Cogent Bancorp and its subsidiaries and affiliates, or the entities they may represent. Content contained herein may be used in connection with the advertising and/or marketing of products offered by Cogent Bank or Cogent Private Wealth. The material is not intended to provide or substitute for legal, tax, or financial advice or to indicate the availability or suitability of any Cogent Bank or Cogent Private Wealth product or service. You should consult with a legal, financial, tax, or other appropriate professional(s) for your specific needs and/or objectives before making any decisions.