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08 Jul 2022
by Maggie Williams

REBA Inside Track: Why inclusive financial wellbeing means getting emotional

Supporting financial resilience through education and awareness is only one part of helping to improve employees' approach to money management

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Financial wellbeing has long been the poor relation of physical and mental wellbeing in the workplace. But the current cost of living crisis has brought it centre-stage and shown why this needs to be a priority for employers – not just in a crisis, but in the good times (that will eventually return…) too. 

In our 2022 Employee Wellbeing Research (based on data gathered in January 2022, before the Ukraine war) we asked respondents how they rated the quality of the different pillars of their wellbeing strategy.  

Just 11% said that they have a mature financial wellbeing strategy that aligns with their business goals – compared to 29% who said the same of their mental wellbeing strategy. More (30%) said that they had lots of disparate financial benefits, but that these weren’t joined up into a strategy. 

The difference between offering disparate benefits and a mature financial wellbeing strategy is significant – and the cost of living crisis has made that difference even clearer. Financial wellbeing is not defined by how much someone earns, whether they pay into the workplace pension scheme or join the company share plan. It is being in control of their money and having confidence to plan financially for the short and the long term. 

That also means poor financial wellbeing is not restricted to lower paid workers. In fact, recent research from LCP found that high earners with onerous spending commitments are often in poorer financial health than more moderate earners with streamlined financial affairs. 

If there is a silver lining to this crisis, it has raised awareness of financial wellbeing and the effect it can have on workforce planning (early retirements and employees leaving for golden handshakes elsewhere), mental wellbeing (money worries have a powerful impact on mental health) and employee engagement. It has also shown that benefits and wellbeing have a crucial role to play where pay rises are not the answer. 

Speaking at an industry event earlier this year, former Pensions Minister Guy Opperman concluded that ‘the Great British public is not great at saving’. Figures from the OECD suggest that Opperman is right. In 2019 (i.e. before the pandemic and current crisis), the UK had the lowest household savings ratio in the G20. While ratios improved during Covid-19 lockdowns, current soaring prices have stamped on any suggestions that we might have accidentally morphed into a nation of savers. 

Poor financial literacy is part of the problem. According to the Financial Conduct Authority, more than half the population has low confidence in making money decisions, and low financial literacy is linked to poor financial outcomes. Vulnerability – whether through long-term characteristics such as ill health or short-term impacts like relationship breakups – will also have an impact on our relationship with finance. 

While financial education can help, creating literacy and resilience also means exploring our emotional relationship with money, as well as how it affects our mental wellbeing. The relationship between financial and mental wellbeing is well known: if you have money worries, they will affect your mental health. But this is a two-way street. Almost half of people experiencing debt also have a [diagnosed] mental health problem. And the way that all of us respond to money will be affected by our past experiences, self-esteem and personality types. 

Here are a few examples: 

  • Fear of finances – our relationship with money is often rooted in our upbringing. Family financial struggles in childhood might drive fear of being unable to pay bills or address financial challenges when they appear. 
  • Lack of role models – anyone who has grown up in a household and education system where money is never discussed or is approached with fear won’t have a positive model of how to manage their finances or talk openly about it.  
  • Breadwinner pressure – the traditional role of men as breadwinners might sound like it belongs in the 20th century, but is still emotionally ingrained in many men’s (and women’s) thinking, consciously or otherwise. 
  • Keeping up appearances – pressure to compete with successful friends, or match family expectations can put finances and relationships under stress. 

These emotional reactions to money – and hundreds of other, similar scenarios – impact people’s control and confidence in their finances. While financial education will help improve literacy and awareness of ways to save, to really improve financial wellbeing for everyone, we have to help employees understand and reconfigure their relationship with money at a much deeper level. 

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