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Financial stability is essential for both households and businesses. When households and businesses are financially stable, they are better equipped to weather unexpected expenses, plan for the future, and make investments that can lead to growth and prosperity.
However, there are many barriers that can prevent households and businesses from achieving financial stability. In this article, we will explore the importance of removing these barriers and creating a more stable financial environment for all.
The forgotten barriers to financial instability
Barriers to financial stability can take many forms. For households, forgotten barriers may include low mental health, high levels of debt, and low financial acumen. Countless studies show how financial instability can lead to homelessness, food insecurity, and limited access to healthcare.
For businesses, forgotten barriers to financial stability may include a lack of financial confidence, psychological biases causing poor decision-making skills, and low use of data analytics. Regardless of the specific barriers, the effects can be devastating. This can lead to low profits, job loss, and economic decline.
During times of economic uncertainty, the risk of business failure, household financial struggle, and poverty are at their highest. We operate in a structure that experiences economic flux every several years, it is therefore imperative to focus efforts on improving financial competence so good decisions can be made at crucial times.
Multifaceted benefits
Removing barriers to financial stability positively impacts many areas of society, and creates a ripple effect for the direct beneficiaries and generations to come. Here are some reasons why:
⇾ Increased economic growth
When households and businesses are financially stable, they are more likely to invest in the economy. This can lead to increased economic growth, and job creation, and create more opportunities for the generations that follow.
⇾ Better health outcomes
Financial instability can have a negative impact on health outcomes. Tackling these barriers can help ensure that all individuals have access to affordable healthcare and can take steps to maintain their health.
A study published in the Journal of Financial Therapy found that individuals who reported higher levels of financial knowledge and confidence experienced less financial stress than those who did not. The study concluded that financial education and training can help individuals develop the skills they need to manage their finances effectively and reduce financial stress.
⇾ Increased innovation
When businesses are financially stable, they are more likely to invest in research and development. This can lead to innovation and the development of new products and services that can benefit society as a whole.
The Journal of Business Research found that financial literacy was positively associated with innovation in small and medium-sized enterprises (SMEs). The study concluded that improving financial literacy can help SMEs make better decisions about financing their innovation activities.
⇾ Tackle pay inequality
Tackling financial instability through increased financial skills and confidence in women can positively help close the gender pay gap. Studies show that when women have the knowledge and confidence to make informed career and finance-related decisions, they are better equipped to negotiate for better pay and take on leadership roles, ultimately improving their financial circumstances and closing the pay gap.
It is clear that governments, businesses, and individuals all have a role to play in creating a more stable financial environment for all. By working together, we can create a world in which financial stability is achievable for all.