How to use nudges to better engage employees with financial wellbeing

One of the core principles of employee financial wellbeing is financial education. Having the right solutions in place, such as workplace savings and consolidation loans, are essential ingredients. However, it’s the education piece and the engagement with it that drives action, and it’s the action that eventually results in employee financial wellbeing.

But the main challenge with financial education is understanding what your employees want or need. And you know what? The needs and wants across your organisation will be as varied as the workforce itself.

Some employers deal with this seemingly impossible problem by throwing the proverbial kitchen sink at it. They provide a vast library of reference material that can be searched and accessed when needed. Some go further by providing seminars or workshops on subjects that they feel most people will need to know about at some point.

But this is where, in my view, financial education goes wrong; it’s the words ‘at some point’ that are the issue for me. Financial education in the workplace should be like Just In Time (JIT) manufacturing; the right subject, support and product should be there just when an employee needs it.

For example, the thought process of the employee might look a little something like this: ‘I have a specific issue and I need to know how to deal with it now. Ok there was a seminar or workshop about it three months ago, but it had no relevance to me then so, I didn’t attend. But I need help and support now.’

The JIT of financial wellbeing is the Nudge theory

At first glance, Nudge theory is less about education and more about small prods to elicit a positive change in behaviour; a carrot rather than a stick if you like. But the effectiveness of the nudge is its timing. For instance, if you’re trying to promote better eating habits in the workplace, you’re likely to have more success by replacing a tin of chocolates in the kitchen with a basket of fruit rather than running a seminar on the negative health consequences of a bad diet.

The fruit rather than the chocolate is there when I feel like a snack; in other words, the right choice is there JIT!

For financial education this could mean giving me the option to put some of my annual bonus into my pension scheme or workplace ISA; the option and all the information or ‘education’ being given at the time when my bonus is announced, but not yet paid.

I’m ‘nudged’ to consider an alternative; save rather than spend!

Timing things right

There are going to be general timings that affect us all (even though the impact might be different for each of us), for instance the approaching end of a tax year.

For higher earners, this is when they’re thinking about their tax bill and are therefore engaged with this issue. This is a great time to be messaging about pension allowances (paying in more or reducing it if someone is likely to be affected by the tapered annual allowance) and ISA allowances; use it or lose it.

A deadline date is the best nudge ever! Those employers who offer flexible benefits will understand this more than others. Flex windows are mostly open for a whole month, but a lot of employees only get round to making their choices when the window is about to close.

For younger employees looking to get on the housing ladder, it’s a great time to remind them about the 25% government bonus on a Lifetime ISA (LISA). If they are saving for a deposit, they might want to consider putting it into a LISA to get this tax year’s bonus of up to £1k. It’s the right time to be presenting an alternative to a standard savings account. There’s a deadline date for this year’s bonus; the end of the tax year.

But what happens when they’re ready to buy their first home? The right content and support needs to be on hand; and by this I don’t just mean useful reads. I can Google the topic I need support on and get reams of information, so anything provided in the workplace needs to be more than this.

Providing the most engaging information

There’s no question that digital must be the main delivery mechanism and there must be an app: we live in a world of instant gratification and financial education is no exception.

However, different situations, demographics and needs require different channels. For instance, towards the end of a tax year, an email ‘nudge’ about LISAs with links to further information and the solution are great.

But when it comes to the actual process of buying a house, a first time buyer is probably going to need a lot more hand holding. Some employers run regular seminars and others provide one-to-one sessions with mortgage advisors; this is financial education in action.

There’s no doubt that nudges can really support a good financial wellbeing programme and help employees to engage with it. But they need to be given at the right time with signposts to appropriate levels of education and, ultimately, solutions.

The author is Steve Watson, head of proposition at Smarterly.

This article is provided by Smarterly.