Why financial wellbeing is more than just a buzzword
Financial wellbeing has become something of a buzzword in the workplace. In general it describes an individual’s perception of how financially healthy, happy and free from worry they are when thinking about their financial situation.
The growing need for financial wellbeing
The impact of poor financial wellbeing can be especially devastating for employees, and increasing numbers of employers are now beginning to recognise the link between this, lower productivity and absenteeism in the workplace.
We recently carried out an online poll of 50 employers that found 90% of respondents believe it’s becoming increasingly important to have a financial wellbeing strategy in the workplace.
Nearly half (46%) of all UK adults rate their own knowledge about financial matters as low and almost a quarter (24%) have little or no confidence in managing their money, according to the Financial Conduct Authority’s Financial Lives Survey (2017). As such, we believe the best way to help employees feel secure about their finances is to provide them with the knowledge to make informed decisions throughout their career.
Ensuring employees understand the fundamentals of money management
A big part of the solution is helping employees become more familiar with the basics of money management. Getting them to think about how they spend money on everyday items such as utility bills and insurance is essential.
Another important principle is helping employees understand the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure you have a good deal. At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. The cost of paying the interest may force someone into even greater financial difficulty.
Are employees making the most of the benefits on offer?
It’s also important to look at the employee benefits platform itself. A good starting point is to investigate if employees are taking up and using the benefits on offer. And if not, why? Is it because the benefits aren’t appropriate to the workforce, or are employees unable to understand the way the benefit operates, or how it could help them? Making sure benefits are relevant and well-explained can really help take-up and improve personal money management.
One of the most crucial elements of employee financial wellbeing is retirement preparation. Our Focus on Retirement Income Matters (2018) research found that a staggering 80% of employers believe their employees are not saving enough for retirement. This may in part be because of affordability, which is why money management is so important, but it may be that they do not understand the upside, such as employer matches on pension contributions and tax relief.
Financially empowering your workforce
Employers are now increasingly putting in place classroom-based financial education seminars to help their employees understand all of these issues, as well as one-to-one financial guidance or regulated financial advice for those who need more support. This approach can make sure that the savings effort really pays off and, in turn, leads to a confident and financially empowered workforce.
After all, financial wellbeing should be more than just today’s buzzword – good quality and timely financial education, one-to-one financial guidance and access to regulated financial advice are a far better path to financial wellbeing than leaving employees to go it alone.
The author is Jonathan Watts-Lay, Director, WEALTH at work.
This article is provided by WEALTH at work.
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