10 ways to help employees take control of their finances

With the cost-of-living crisis still raging, workers need all the help they can get to make their money go as far as possible

With increasing costs putting pressure on household finances, 2023 is set to be a financially challenging year for many. So it’s more important than ever to support employees to take control of their finances to navigate the cost-of-living crisis.

Here, we share our money management tips to help employees budget, save and stay on top of their finances.

1. Create a budget

For some, creating a budget may seem a daunting task, but getting an overview of income and outgoings can really help.

Employees should check their bank statements to determine their monthly income and outgoings. Making a list of these outgoings, ie mortgage or rent, energy bills, debt, car insurance, eating out and groceries, subscriptions, etc, will highlight where savings could be made. Any unused subscriptions and memberships that may have been forgotten about should be cancelled.

2. Make managing debt a priority

There are many different types of debt with varying rates of interest. Credit cards and overdrafts can have rates of 18% to 40%, with payday loans having rates of 1,500% and more.

Make paying off expensive debts a priority. For example, a debt of £3,000 with a rate of 18% APR could take 10 years and 10 months to pay off at £50 a month, with a total interest paid of £3,495. If that monthly payment was increased to £100 a month, the debt would be paid off in three years and four months, and the interest paid would be only £908.

Those with credit card debt could be paying more interest on the payments than they need to. By shopping around they may be able to move to a lower interest rate or, ideally, a card offering 0% on balance transfers.

3. Track your finances

After creating a budget, it is important for employees to keep track of their money. Regular budget check-ups can provide a complete picture of where their money goes. Reviewing their bank and credit card statements will ensure their spending habits are aligned with their financial goals. If not, they will find areas where they may be overspending and can quickly adjust.

4. Be a savvy shopper

There are several steps that can help to significantly cut the price of purchases. Planning a list for the weekly shop will allow time to search for the best deals and reduce spending on non-essentials. Changing to ‘value’ brands can typically cut grocery bills by 30%.

Discount vouchers are often available through voucher and discount websites and many workplaces offer employee discount schemes with major retailers.

5. Save on household bills and auto-renewals

Changes in the energy industry mean that it’s unlikely consumers will find good deals on energy costs at the moment. But there are still significant savings available on other bills.

Many policies for car, home and travel insurance automatically renew each year. Sometimes this can lead people to pay more than they need to. To ensure they get the best deal and avoid any price hikes, employees should be proactive by finding out when their contract is due to end and start shopping around in plenty of time or negotiate where appropriate. For the best deal, price comparison websites are a quick and easy way to compare offers.

6. Look for other income streams

Employees may want to consider if there are ways of supplementing their income. Can they rent out a room, or take on extra jobs such as babysitting, dog walking, or freelancing? Creating multiple income streams can increase financial security, help someone tackle debt and add to their savings each month.

7. Build an emergency fund

An emergency fund is a good way to prepare for unexpected costs. The aim is to have 3-6 months of salary saved. It is often a good idea to set up a standing order for saving rather than waiting to see what is left at the end of the month. Cash ISAs could be a great way to start saving while offering easy access to savings. Employees also need to understand how the workplace saving vehicles, such as workplace ISAs and Share plans, can help them.

8. Start saving early

Starting to save as soon as possible means that money has time to grow. It is important that employees understand the importance of saving into a pension from early on. For example, they may not realise that someone in their 20s can increase their pension pot by 25% in retirement by saving an extra 1% a year with an employer match.

9. Don’t neglect your pension

For those in financial difficulty, it may be tempting to try and save money by reducing or pausing pension contributions. But employees should think carefully before doing this because opting out of their pension will have a huge impact on the amount they have when they retire and really must be an absolute last resort. And if they can afford to continue making regular contributions during the market downturn, more positive long-term growth may be generated.

10. Beware of scams

Scammers tend to sound and look completely legitimate and it’s easy to see why so many people are fooled. In fact, almost a quarter (22%) of UK adults reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May 2022. If someone offers a deal that seems too good to be true, it’s vital to check whether the company is registered with the Financial Conduct Authority (FCA). The FCA’s ScamSmart website includes a warning list of companies operating without authorisation or running scams.

Now is a great time for employees to work out what their financial situation really is, and take action to make sure they are in control of their finances in 2023.

Proactive employers are working to help those in the workplace to improve their financial future, remove the stigma around money worries and access support. Key to this is offering financial education and guidance to help employees understand their finances, including ways to manage a budget, make savings and manage debt, as well as how other workplace benefits available can help.

With the cost of living crisis hitting many hard, supporting employees to build their financial resilience and improve their financial wellbeing is of utmost importance right now.