Emotional Finance : Financial Health or Freedom ?

Writing about finance is always tricky. Either there is a lot of focus on financial institutions or services, or they are written with a lot of customers in mind. But indeed, striking a balance between the two is always very difficult.

In this article, I have a lot to share with you about ‘financial health’ and it is useful to clarify a few issues beforehand. Many studies we have done show that when we ask people what is financial health, the first thing that comes to mind is having enough money to spend without any anxiety and thought. This answer is almost always the same, except a few specific geographies. Of course, in some European countries, it is useful to exclude a certain demographic group that has grown with the seeds of development and prosperity. But this is especially true for the new generation, “Generation Moth — Those Whose in Love with the Light of a Screen”. So what is this financial health then? To perceive this issue only as financial literacy is starting with the wrong foundation. Financial health is the ability to examine a person’s entire relationship with money, not only at financial institutions but at all points. In other words, it is not necessarily how much money you see in your mobile banking apps or physical money in your pocket; it includes the behavioural and emotional decisions you will make on the road to retirement. From how much money you have made so far to increase that month. Certainly, this is not just a basic income and expense table; It is an effort to take control today for a big goal in the future. Even if many financial institutions want to define it, or even use it as a slogan, it is really difficult for the customer to set out achieving financial health without understanding what it means. Financial freedom and financial health should not be confused.

Let me give you an example from a region outside of Turkey. Hong Kong is one of the few major financial centres in the world. They have a very strong financial structure and strong banks. Mobile usage is high, people are not afraid to use digital services, but with all this, there is a basic problem. In Hong Kong, a young person has to work almost forever before he can buy a small apartment! Don’t get me wrong, it is almost impossible to do this even if he has risen to the position of director in a private company over the years. And whoever you talk to in this geography, you hear that the biggest goal is to buy a house one day. It is difficult to bring the conversation to paying their credit card in time when a basic condition and emotional need is still unfulfilled.

Compared to some other major financial centres where people can define financial health as three to six months of unemployment. People can confuse financial freedom and financial health very easily. The basic question is why do people love spending what they don’t have? In the answer to this question, we can open many issues fuelled by inflationary economies, but basically we should not underestimate the impact of the positive motivation that society and people feel without having anything easy. The hard part is to be able to examine emotional finance, remembering that not only people look at the money in their accounts, but also a lot of money in their dreams and goals. Of course, it is also necessary to put forth shortcomings of financial systems. Generally, in many markets, customers work simultaneously with multiple banks. Studies show that normally not all assets and expenses can be seen in one place. This creates great stress and responsibility for the user and prevents financial institutions from providing smarter services. It is quite difficult for a user to manage their accounts at three different banks. Therefore, PSD2 and its accounts consolidation, which is followed with great importance in some countries, will become very important in coming times. Although we see pioneering practices in markets such as the UK and US; we are yet to see rapid progress due to both, confidentiality of customer information and financial institution concerns about losing customers. We need smart banks to really understand the customer

Basically, new smart banks need to emerge to create emotional financial services. Smart banks, which operate in a way that sees, feels and understands the data as a person’s life, rather than just data or how much money they have. It is obvious that digital currencies will also have a gathering effect on this. Finally, financial health is not the same for everyone. Just as every diet doesn’t suit everyone, it is a process that needs to be perfected by understanding customers’ emotions and needs and understanding that money travels in an invisible way in every part of life…

*This article is originally published on Digitalage Magazine