How to shift employees' mindsets to better support their financial wellbeing

Some psychology experts have suggested that economics is in fact a branch of psychology – so, it stands to reason that an individual’s attitude to financial wellbeing is rooted firmly in their mentality.

Psychologist Dr Peter Collett notes that a lot of evidence links people’s financial behaviours to their individual psychology. As most employers now know, similar research also tells us that as an employee’s financial wellbeing declines, so does their ability to do their job – which in turn costs employers money through lower productivity, absence and lower engagement.

“Almost 88% of HR and benefits professionals have stated that providing financial wellbeing support is they responsibility as an employer.” Smarterly, Realigning the workplace savings offering to meet the needs of millennials (2019)

Most people find it difficult to save money. Millennials (now the majority of our employees) and Generation Z (soon to be 40% of the workforce) are struggling financially, more than any other generation currently working. Young people are fighting to cover urgent expenses associated with rising rents and student loans, meaning future priorities like saving for retirement are falling by the wayside. Marriage and children come later in life for financial reasons alone, and forget affording a house if you were born after 1996. So, when it comes to financial wellness – employers are already trying to fight financial fires. How can you improve the financial health of a generation born into crippling debt?

Well, according to Gallup, people tend to enjoy saving more than spending – so why are we still so bad at it?

Small steps

Making better financial decisions doesn’t require big gestures. While nobody’s going to say ‘no’ to a lottery win, in reality, helping your employees to make small steps towards securing their financial future is one of the best ways to improve financial wellbeing.

Having tangible goals is a good way of doing this. By setting goals, people get what is called ‘anticipatory happiness’ from their future success. Perhaps someone is saving for a holiday, so they think frequently about the ‘reward’ that’s about to come their way. Employers should consider financial wellbeing initiatives that encourage saving, particularly those that help them secure their future (such as pensions). One of the most popular ways of encouraging this behaviour is ‘Nudge Theory’.

Nudge theory

Nudge Theory is a modern concept which focusses on creating choices for people in a way that will then encourage a particular decision. By presenting choices in a certain way, people make wiser decisions, and although the decision is still theirs, they get nudged one way or the other. So, this is where having life event data on your employees will really pay off; if you know that they’re getting married, having a baby, getting ready to retire etc, you can prompt them at exactly the right time to make a financial decision, with exactly the right content to inform that decision, which will ultimately benefit you both.

The stress of debt

To maximise their happiness, an employee needs to get out of debt. The trouble is that being in debt inherently tends to lead to over-spending, to overcompensate for being in debt. Financial stress is overwhelming – who hasn’t laid awake at night or been distracted at work worrying about the number in their bank account? In the workplace, there are a multitude of financial wellbeing initiatives, from learning-based schemes focussing on pre-emptive education, to tools aimed at reducing or clearing an employee’s credit card debt through payroll lending.

“65% of us lose sleep worrying about money.” Benefex, Financial Wellbeing Insight Report.

Final thoughts

Financial wellbeing means different things to different employees. For some it’s about securing their future, for others it’s about solving an immediate need. We believe that no single solution will meet the needs of a diverse workforce, and that a combination of financial wellbeing initiatives is the best way to offer staff the personalised and timely help they need towards a more comfortable financial future.

Our virtual guidebook for employee wellbeing covers all the best benefits, tools and services to build your organisation’s perfect wellbeing scheme. Or, if you’d rather speak to a human, just get in touch!

The author is Gethin Nadin, director of employee wellbeing, Benefex.

This article is provided by Benefex.