This is Why a High Credit Score Might Not Make You Financially Confident

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Honest Abe

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Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.

Would you consider yourself financially confident?

Could you ever consider yourself financially confident?

Those seem like tough questions to answer positively because you never know what kind of surprise bills life will slap you with.

Credit Sesame dug into this question and found some interesting factors that correlate with financial confidence.

High Credit Scores Don’t Mean Financial Confidence

But it helps.

Check your credit score. Seriously. It’s free, so you have no excuse.

Now, see where you fall into these categories.

Credit Sesame asked: How confident do you feel that you are saving enough for a stable future?

Here’s how 1,028 respondents answered:

financial confidence

These numbers seem obvious. Those with a higher credit score are more financially confident. Duh.

However, Credit Sesame found an even stronger indicator of financial confidence: savings.

Credit Scores Don’t Seem to Entirely Dictate Financial Confidence

Credit Sesame continued to breakdown this concept of financial confidence.

It asked its customers what they’re saving for and then compared that to how confident they felt about their financial future.

Here are some more numbers for you:

financial confidence

Through this breakdown, it seems as though those excellent credit scores don’t matter as much and that financial confidence largely hinges on the respondent’s ability to save.

“Members who are not currently saving toward retirement, college, an emergency fund or a vacation fund have the lowest confidence of all,” Credit Sesame deducts.

“Avoiding debt, funding an emergency account, and saving toward known future financial needs are behaviors that clearly lead to financial peace and freedom.”

How to Build Financial Confidence

Although credit scores don’t necessarily seem to be the answer to financial confidence, they can help you begin taking steps in the right direction.

Your credit score is determined by factors on your credit report, so pull a free one and take a look. You’ll be able to see if any bills are in collections or if you have an unpaid credit card bill, for example.

Once you start taking steps to pay off your debt, you can begin thinking about saving money. This doesn’t have to be done in one fell swoop. You can take your time establishing a savings.

Read this month-by-month guide to saving $1,000 to get started.

Breaking down savings by category can help the process seem more digestible and less intimidating.

For retirement, first figure out the best place to stash your money. Penny Hoarder Dana Sitar analyzed some of your options — from under a mattress to high-yield savings accounts to a Roth IRA.

For college, look into 529 savings plans in your state. But first, understand what a 529 savings plan is and if it’s the right move for you.

For emergency savings, which seems to be the largest indicator of financial confidence, your first step will be to establish a separate, “do not touch” account that incurs interest, like the Aspiration Summit Checking Account. You can earn up to 1% interest, about 100 times more than the average interest rate.

Here’s your guide to starting an emergency fund — and figuring out just how much you need to save.

For vacation savings, well, we can’t say this is the most important account to fund. But if you want to mindlessly save for your next trip, try using an app like Qapital. It’ll save money based on various tasks. For example, hit 10,000 steps in a day and save $5. See how it works here.

Now… are you feeling more financially confident yet?

Carson Kohler (@CarsonKohler) is a junior writer at The Penny Hoarder. She can’t say she feels totally financially confident — but she’s working on it.

Honest Abe

Disclosure:

Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.