How firms can turn financial education into employee action
Financial literacy is important for everyone, but is often a skill people lack. A recent study by Shepherds Friendly found that just 27% of people in the UK passed a money literacy test, meaning almost three-quarters struggle with financial literacy.
Some employers are plugging the financial literacy gap with financial wellbeing becoming part of their benefit strategies. This has been promoted in part by concerns since the Covid-19 pandemic and the more recent impact of the cost-of-living-crisis.
Money worries and anxiety can have a huge impact on our mental and physical wellbeing. A global survey by financial platform Nudge found that nearly half of employees feel anxious about their finances. It also showed that the number of people who want their employers to offer financial education benefits and tools rose dramatically, from 26% to 42% between 2022 and 2023.
Financial wellbeing is essential for fostering a thriving and resilient workforce. Leading businesses are recognising financial wellbeing as a fundamental pillar of their overall wellbeing strategy. The reality is almost every employee benefit an employer funds is in some way related to an individual’s financial wellbeing.
There is a distinct difference between awareness and information and providing financial education and motivating people into action. The challenge for employers is to bridge the gap between knowledge and action.
Steps to spur action
We live in a world of constant information overload, from email bombardment to adverts and social media. Just sending out a few generic and sporadic communications by email or simply hosting information on the intranet is simply not enough. Employers need to move away from focusing just on information towards an engagement and education strategy.
Targeted communications, education, guidance and advice at relevant and timely career stages from the moment an employee joins the organisation to when they leave will have far more impact than sporadic communications.
This might start with information in the joining pack for new employees on the company benefits and pension scheme, but follow up with specific financial wellbeing communications designed for employees at different stages in their life.
Employers need to develop their strategy based on the demographics of their workforce and provide communications that are relevant. If not, they can end up losing people’s interest as they switch off from information that isn’t useful to them.
Communications need to improve
Our recent Benefit Design research with REBA highlighted that benefits communications is the area most in need of improvement. For financial wellbeing support to be successful and encourage action it needs to be tailored, regular and of value – supporting employee needs and life goals during the course of their career.
Financial learning could then move on to group sessions, advice and coaching in specific areas designed to build people’s knowledge and confidence on key topics. These could be around budgeting and money management, debt, savings and investment, pensions, estate planning, property and inheritance.
Tailoring what is offered is essential. There is little point running a session on the changes to the pension allowances if most employees are on minimum wage and it won’t affect them. Equally, if the workforce is older with some approaching retirement, then pension planning and advice on what they can do with their pension pot should be on the agenda.
Decide on the goal first
Encouraging and empowering employees into action, though, will depend on what the goal is, whether that’s supporting them through the cost-of-living crisis, getting them to save more into their pension or helping them make investment decisions. Employers need to establish that before deciding the strategy.
No matter what the objective, all employers need to consider three key points when thinking about financial wellbeing and encouraging action: what level of support they want to give, how they will facilitate it, and whether they need to outsource certain elements, such as investments, tax, mortgages or pension advice.
For employers that want to put together a more comprehensive financial wellbeing strategy should speak to an advisor. Howden Employee Benefits & Wellbeing can deliver financial education programmes to educate employees on key financial areas, as well as provide pensions guidance and help create a tailored benefits communications strategy.
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In partnership with Howden Employee Benefits
Howden provides insurance broking, risk management and claims consulting services, globally. We work with clients of all sizes to provide dedicated employee benefits & wellbeing consultancy.
