How to build a financial MOT that delivers value for employees
Many of us have direct debts that pay for our bills and commitments including insurances – and a considerable number of those may well be on auto-renewing contracts that just roll over so we don’t have to worry. But, is that the best thing for us and does it mean that we sometimes miss out on opportunities to save money? We could be missing out on better cover as policies change, and let’s not forget more cost-effective options (either cheaper premiums, or enhanced services and options for the same amount each month).
Often, we use life events as triggers to review things – starting a family, changing job, moving home or when something goes wrong. Most employers will have an annual benefits window whereby their employees can choose or change their employee benefits. This could be a great time to encourage your employees to review their financial health and undertake their own financial MOT.
What employees should consider
This doesn’t mean that employers should sit down with every employee, far from it. Some simple communication and nudges to get employees to think about their financial health when making those benefit choices is a great way to start. But what should employers be encouraging their employees to consider when it comes to auditing their individual finances and working out which benefits are for them?
- Protection – what insurances do they have, or what should they consider based on their personal circumstances? Life, health, dental, accident, vehicles, buildings and contents insurance, for example.
- What kind of saving (if any) are people doing and what is the best for their current situation? Short-term (rainy day), medium-term and/or long-term (retirement) savings.
- How much debt do they have? Levels and types of debt including loans, credit cards and other borrowing.
- Money management – spending behaviours, household bills, utilities, travel, family finances, charity donations (ad-hoc and regular) and budgeting.
- Longer term goals – personal, family and work-based goals.
- Legacy planning – wills, inheritance tax planning and estate management.
- What areas do you need more knowledge around to increase your awareness of your financial help?
Financial wellbeing doesn’t come from spending more or less than you currently do, it comes from having control over what you spend. Understanding where your money goes and making sure it’s working in the best way it can for you is a great first step to taking control of your financial health.
Nudging employees
For some people, they may have complicated financial situations that require an independent adviser. But for the majority, this is more likely to be a simple process of looking at their current budget and highlighting when the annual renewal is. It doesn’t have to be a big exercise where you review everything together, employees may prefer a process of identifying one aspect now, then something else in a couple of months and then another a couple of months after that.
Employers using benefit windows as a hook to remind people that they should do a bit of a personal financial audit can therefore be a powerful tool that puts this on people’s agenda. This is also a great time for employees to consider their protection benefits as they may wish to increase or decrease, or make other changes to the cover they have based on their needs.
From an employer perspective, it’s about communicating what’s available and when. Providing enough information, options and support can help your employees make smart well-informed financial decisions when they need to and have more control over their finances.
The author is Heidi Allan, senior financial wellbeing consultant at LCP.
This article is provided by LCP.
