Personal Finance Ecosystem | by NEFE

Personal Finance Ecosystem| NEFE

While I have personally chosen to focus my attention on Financial Education and Discipline, there is more than that to consider along my path towards Financial Freedom. While it is great to have a holistic view and understanding of all elements that play a crucial role in your financial situation, once I move into “execution mode”, I want to focus on essential strategic aspects “under my control”: education and discipline.

Having said that, there is a time and place to go back to a holistic analysis and, in those moments, I strongly value the work of the American based National Endowment for Financial Education® (NEFE®). For instance, they have recently developed the Personal Finance Ecosystem framework outlined in the above graph. It is conceived as a visual roadmap that lays out the foundations that underpin an individual’s state of financial well-being. This is a research-informed framework developed for:

a) practitioners, researchers and policymakers.

b) individuals to understand the unseen forces at play in their financial lives as well as highlight opportunities for intentional change.

Overall, it gives context to the factors – one of them being financial education -that influence financial well-being. In doing so, it helps understand the unseen forces at play in their financial lives as well as highlights opportunities for intentional change. It also suggests what interventions and efforts aimed at influencing financial well-being realistically can achieve.




1) FINANCIAL WELL-BEING is an ever-changing, personal state that typically includes factors such as satisfaction with the ability to manage one’s current financial situation; the ability to exercise choice and feel in control of finances; and the outlook for future prospects. In the Personal Finance Ecosystem, financial well-being is self-defined by the individual. A comparable way to think of financial well-being is to relate it to the pain scale at a doctor’s office. What matters most is how the patient feels and how they assess their own pain. Two people enduring the same affliction may score themselves very differently based on pain tolerance and any number of other factors. Each individual gets to say how they feel about their situation and may feel fine despite very significant challenges. Importantly, NEFE intentionally refrains from saying an individual achieves financial well-being as if it were a final destination. Rather, financial well-being is a state that changes. Someone who feels financially fragile still has financial well-being, just as someone who is diagnosed with a health condition still has a measure of physical health that can be improved or worsened based on any number of factors or interventions. Financial well-being will fluctuate over time and is not a static end state. Lastly, every individual always has some level of financial well-being, so financial well-being never starts or ends.

2) FOUNDATIONAL FACTORS. They include a wide variety of aspects that influence each part of the framework at a fundamental level. These factors can broadly be grouped into (2.1) general skills and competencies; (2.2) values and beliefs; (2.3) family and culture; (2.4) socioeconomics and geography. While the factors are germane for all individuals, the way in which they collectively influence a specific individual is unique. Note that foundational factors are broadly categorized for ease of information sharing, but the groupings themselves are not consequential, so long as the factors themselves are foundational.

2.1) General Skills and Competencies include basic literacy and numeracy, problem-solving skills, critical thinking, information literacy, executive function, self-advocacy, communication, persistence, and other similar competencies.

2.2) Values and Beliefs include internal factors like motivation, affect, attitudes, cognitive bias, time discounting, risk preference, stress, trust in the financial system, and other mental constructs.

2.3) Family and Culture include personal factors like family socialization and family composition, as well as culture.

2.4) Socioeconomics and Geography include overarching factors like the state of the economy, socioeconomics and systemic inequality, and issues specific to a particular region or locale.

3) FINANCIAL KNOWLEDGE AND ACCESS. It is the individual’s ability to act in their own self-defined best financial interest. It is comprised of two key elements: (3.1) the financial knowledge and skills to decide or act (i.e., financial literacy) and (3.2) the opportunity to take action and exercise choice within financial society (i.e., access and inclusion).

3.1) Financial knowledge is the objective mastery of financial definitions, terms and concepts. Financial skills determine whether an individual can make decisions with that knowledge. For example, a person might know that a credit score of 800 is good but not know the steps to improve their own credit rating. Skills put knowledge into action.

3.2)  Access and Inclusion refer to participation in financial society, which NEFE defines as the opportunity and awareness to take action and exercise choice within financial markets, the financial services industry, and all aspects of financial life. NEFE acknowledges there are numerous barriers to full inclusion for many individuals, most of which are systemic.

4) THE FINANCIAL ACTIONS AND OUTCOMES CYCLE is a feedback loop comprised of the individual’s mindset and available choices, followed by the decisions made and actions taken by the individual as well as the resulting outcomes and the impacts of any external shocks (i.e., unexpected events). Note that whether an individual makes choices that positively impact their state of financial well-being can be influenced by other elements of the Personal Finance Ecosystem.

4.1) Mindset and Available Choice Set: Broadly defined as a set of mental attitudes, an individual’s mindset at the time they make a financial decision or transaction influences the choice they make. Some aspects of an individual’s mindset are based on foundational factors. Their mindset might change from moment to moment (e.g., mood), be based on a particular situation (e.g., heightened stress from unexpectedly needing to move to a new city) or may persist over time (e.g., a belief in one’s ability to solve problems). A person’s level of financial knowledge and skills influences the mindset they bring to a specific choice. The degree to which they have an opportunity to exercise choice in the marketplace also influences their mindset. And, because the mindset is part of a cycle, it also depends on the results of the most recent actions taken and decisions made.

4.2) The available choice set at any given time depends on the outcomes from previous actions or unexpected shocks; the degree to which they have access to—and are included in—financial society; and/or whether they have access to financial information. For example, a job seeker with a high school diploma will have a different set of opportunities available to them than a college graduate. Or, someone with a low credit score will not have access to the same contract terms as someone with a high credit score. Foundational factors such as the state of the economy or a person’s family or culture can also inform available choice sets and how they are perceived.

4.3) Decisions and Actions: The presence or absence of decisions made and actions taken by an individual. Decisions and actions might include making a purchase, taking a job or selecting a place to live.

4.4) Resulting Outcomes: Outcomes themselves can be objective (e.g., credit score) or subjective (e.g., confidence). Outcomes can result from decisions and actions (or indecisions and inactions) as well as from external financial shocks. Shocks can be positive (e.g., wage increase) or negative (e.g., large health care bill, victim of fraud).



For individuals, organizations and institutions wishing to increase others’ financial well-being, four leverage points are identified, each acting on a different part of the Personal Finance Ecosystem. Interventions at these leverage points are collectively termed Catalysts for Change. All four are equally important, but one may end up being more impactful for a particular individual.

A) Knowledge Influencers seek to bolster financial capability through strengthening financial knowledge and decision-making skills.

B) Structural Policy Changes intend to impact financial capability by way of increasing participation in financial society through better access and inclusion to financial markets and services.

C) Behaviour Influencers aim to directly impact an individual’s decisions and actions.

D)Social and Material Support strive to change the outcome an individual would otherwise experience in a specific situation or circumstance, such as through public benefits or community assistance programs.

A) KNOWLEDGE INFLUENCERS (acting upon Financial Knowledge and Skills): A variety of engagements implemented with the purpose of increasing the individual’s overall financial knowledge and decision-making skills or to inform them about a specific, narrow topic. There are two main types: Financial Education and Financial Information and Tools.

Financial Education: A systematic approach to cultivating financial knowledge and financial decision-making skills. Education implies the use of appropriate pedagogy, learning objectives and assessment techniques, as well as being of adequate duration to allow the learner to incorporate new knowledge into their existing schema.

Financial Information and Tools: A variety of tools, resources and activities that inform individuals about a topic or decision. Examples include small-dose lessons not part of a broader program or curriculum, articles or reference resources, tips and tricks, calculators, and decision aids. They often are used in self-directed inquiry or in conjunction with behavioural interventions. They can and should be used as a part of a financial education program or initiative, but on their own do not constitute education as they lack pedagogy, learning outcomes and assessment techniques as well as sufficient duration and intent for the learner to fully assimilate the information into lasting knowledge.

B) STRUCTURAL POLICY CHANGES (acting upon Access and Inclusion): Includes public policy aimed at increasing access and inclusion within financial society. Examples include government regulations and community initiatives, such as
the adoption of rent reporting which creates new opportunities for people who were previously credited invisible to become scorable. In turn, these people have access to a new set of products and services. Certain financial technology innovations may also improve access and inclusion. It’s important to note that barriers to full participation in financial society are largely systemic, and systemic issues can only be addressed with fundamental structural change.

C) BEHAVIOR INFLUENCERS (acting upon Decisions and Actions): A variety of interventions implemented with the purpose of helping an individual make decisions or cultivate certain behaviours. Behaviour influencers include informational interventions (e.g., just in time), nudges and choice architecture, expert advice or guidance (e.g., from certified financial planners) and financial coaching, counselling or therapy (including psychoeducational groups).

Behaviour influencers are distinguished from knowledge influencers by their intent. Most of the time these interventions are trying to manifest behaviour rather than check for knowledge gain. As such, behaviour influencers may influence knowledge and decision-making skills, but their goal is not explicitly to bolster that element of the individual’s experience.

D) SOCIAL AND MATERIAL SUPPORTS (acting upon Resulting Outcomes from Decisions, Actions, and Unexpected Events): Includes direct assistance to individuals from entities such as government or community organizations. Sometimes used to ameliorate the effect of a financial shock or provide the assistance needed to meet basic needs, outcome supports act as a safety net. Examples include unemployment insurance when someone loses a job, healthcare paid for by Medicaid or delivered through community-funded clinics, the Supplemental Nutrition Assistance Program (SNAP), and other public benefits.


  • I appreciate how NEFE defines “financial wellbeing”. In their view, it is not a destination. It is not a goal. It is a state that changes, and it is self-defined by each individual. 
  • I like their definition of Financial Knowledge: the ability to act in their own self-defined best financial interest. It makes sense to have it as part of the Foundation Factors.
  • The Section on Financial Actions is strategic. Together with Financial Education, It is where we can exercise the highest control. 
  • The Section Cathalist for Change outlines external resources you can access in case of need, or where you can focus your passion and work to contribute to a positive impact in your target community. 
  • Ultimately, the NEFE Ecosystem framework is a great visual tool for individuals and professionals in the financial sector (educators, policymakers, social workers, volunteers, etc.)

Financial Wisdom + Discipline = Financial Freedom


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