Military families experience numerous financial difficulties during active service. In fact, “financial stress connected to military service is cited more than any other military-family issue by veteran spouses (54 percent) and military spouses (49 percent), as well as by veterans (44 percent).” ¹
And when it comes to transitioning back into civilian life, things can be just as difficult for military members. “Among active-duty families planning to leave the service within two years, more than half have less than $5,000 in savings for an emergency.”² What’s more, according to a recent survey, “60 percent of respondents don’t have enough in their savings to cover three months of living expenses, and 15 percent of respondents have faced food insecurity.”³ And according to the National Foundation for Credit Counseling (NFCC), veterans are almost twice as likely to have debt carried over from month to month (58%) than civilians (just 34%).”⁴
The impact of financial stress harms the entire family with “86% of Military and Veteran families suffer[ing] physical and emotional effects from financial strains.”⁵ However, there isn’t one clear answer as to why military members face such significant financial challenges. When comparing civilian pay to military pay, there isn’t a clear winner in all comparisons. Furthermore, veterans are actually more likely to have completed high school and are more likely to have completed some college or obtained an associate’s degree than civilians. So why exactly are military personnel and veterans struggling to manage their finances?
Unfortunately, like the majority of the American population, military personnel lack the financial literacy needed to manage their finances more effectively. The burden of financial stress is compounded by the stress brought on by the nature of their work serving and defending our country. And although there are resources available to aid military members and their families with money matters, the “Department of Defense (DoD) and Department of Veterans Affairs (VA) processes isn’t always intuitive—especially when it comes to [managing]...debt, buying a home, or planning for retirement.”
Financial Institutions Are Well Positioned to Help
The sacrifice made by the men and women who answer the call is well deserving of our gratitude and appreciation. Financial institutions in particular can play a big role in not only honoring, but truly protecting those who protect us.
Today, “ 90% of military families⁶ want more advice on financial planning.”⁶ Luckily financial institutions are well positioned to help these members and their families avoid financial crisis. Financial literacy programs, specifically geared towards military members, can help them prepare their finances when they’re on active service, as well as when they transition back into civilian life.
And financial literacy can start with basic things like understanding taxable differences between civilian and military salaries. For example, many new military retirees accept starting salaries that sound attractive, but are shocked when their first (net) civilian paycheck is significantly smaller than they had expected. That's because they forget or are unaware that civilian salaries are fully taxable, whereas a portion of their military compensation was tax-exempt (subsistence and housing allowances).
One way USAA is helping these vets transition is by providing a calculator that they can use to understand the difference in taxes, helping them gauge what kind of salary they need to maintain their quality of life. In that same vein, financial institutions that adopt new and innovative technologies from AI-driven self-guided financial advice to comprehensive digital money management tools can help military members stay in the know about their finances at all times.
How MX Can Help
At MX, we actively support our troops in various ways. One way is through our partnership with Patriot Boot Camp. Today, more than 2.4M businesses are owned by veterans.⁷ And veterans are “45% more likely to be self-employed than non-veterans.”⁷ We work with Patriot Boot Camp to mentor veterans as they take on the role of entrepreneurs.
We also partner with financial institutions that are dedicated to helping the world become financially strong. One way we help put people’s lives on the path to greater financial wellness is through MoneyMap with Pulse—a completely self-guided financial wellness tool that financial institutions can use to empower military personnel during their service and as they transition into civilian life. With guided financial advice and AI-driven personalized insights, financial institutions can help their customers make better decisions in real-time, building financial strength and increasing their engagement.
See how Pulse can benefit your customers >>
- (source: Military Family Advisory Network -MFAN)