Financial capability is not ‘one size fits all’: AFCPE Executive Director

Rebecca Wiggins, Association for Financial Counseling & Planning Education Executive Director, joins Yahoo Finance’s Sibile Marcellus and Alexis Christoforous to discuss the importance of financial capability.

Video transcript

ALEXIS CHRISTOFOROUS: The White House has named April Financial Capability Month to help educate Americans about the need for responsible saving and spending. Joining us now is Rebecca Wiggins. She is executive director of the Association for Financial Counseling and Planning Education. Rebecca, thanks for being with us today. First off, just tell us what Financial Capability Month is all about.

REBECCA WIGGINS: Sure, so thank you so much for having me today. Financial Capability Month is really just the recognition of the importance of high quality financial education. In the president's remarks in declaring Financial Capability Month, it was really interesting to see the tone shift not just from financial literacy as it's been in the past, but, really, to this broader definition of financial capability and helping people really understand that intersection of information, of course, the financial literacy piece, but marrying that with high quality education resources, professionals who are qualified, and then, really, the systemic approach as well, so that people are really able to make the best choices for themselves based on their goals and their values.

SIBILE MARCELLUS: So what makes you financially capable? What are actual concrete steps individuals can take?

REBECCA WIGGINS: Sure, great question. So I think the important thing to think about when you're thinking about financial capability, there's, of course, the basic things that we talk about a lot with clients, which is trying to spend less than you are bringing in every month or making sure that you're trying to get yourself out of debt and make sure that you have something set aside for savings, that are sort of cornerstones to what we think about being financially well, so to speak.

But I do think it's important that we also focus on and understand how personal money is and that it's really important that you think about your own situation, your own commitments, making sure that you have a spending plan that really reflects your values and those commitments that you're making in your life. And so that you're really tying in how you want to live your life based on your unique values. It's not one size fits all. It's important to make sure that you talk with other people about money. We want to reduce the stigma around talking about money. But it's important that you understand it is personal. And so sometimes you need to get help from a qualified professional as well.

ALEXIS CHRISTOFOROUS: You know, there are some sobering statistics I just want to share with everybody for a moment. Pre-pandemic, 46% of Americans said they did not have a rainy day fund for emergencies. Most of those were millennials. What can Americans start to do when they think about budgeting on a month-to-month basis to try and shore up that rainy day fund? Because, you know, sadly, most people do need to dip into it at some point.

REBECCA WIGGINS: That's right. Well, I think that's an important point, actually, is that sometimes it's difficult to think about taking money out of your savings for things that come up. But that's what it's there for. So, one of the biggest things I think can be a barrier is just understanding that you can start small. You don't have to make a lot of money to be able to put money away into savings.

Start where you can and build it from there. It's important to start early if you can and really, again, understanding, even if you get a tax refund and that's your only time during the year where you have a surplus of money, put that away or put some of that away. Because as you said, life happens. And if we're not prepared for those emergencies, that can really set you back even more.

SIBILE MARCELLUS: There's a plethora of people out there calling themselves finance experts. How do you find out which ones you can actually work with that are reputable?

REBECCA WIGGINS: It's a great question. So I think one of the things we have to start with is understanding that there are different types of advisors, depending on where you are in your financial journey, so even understanding the difference in the profession between financial counselors and financial planners. Financial counselors are going to walk with you to help you get out of debt, through some of those money management struggles, even understanding some of the emotional aspects of money, and helping those clients get to financial wellness or get on a plan towards financial wellness.

A financial advisor or a financial planner that's licensed to sell product are going to help you more with your investment portfolio, managing your wealth, and thinking about that long-term savings plan. And so I think it's really key that people understand those distinctions, but also understanding that you need to be looking for a nationally recognized credential, one that requires continuing education and an ethics component for their professionals.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Rebecca Wiggins, thanks so much. We appreciate those tips. And a reminder that Funding Our Future is an alliance of organizations dedicated to making a secure retirement possible for all Americans.