You’ve probably had science and math classes in school, but not lessons on how to manage your money, which some might say is equally or more important than other subjects in the syllabus. Money makes the world go round and it’s on everyone’s mind. A study done by Princeton University showed that stressing out about money takes up significant mental bandwidth. If you see Jim sitting in his cubicle looking worried, it might not be work he’s concerned about. That brings us to the topic of financial wellness, something that’s been appearing more and more often on the agenda of employers, because 69% of workers are occupied with their personal finances at work, bringing their overall performance down.
What is Financial Wellness and Why is it Important?
Financial wellness is basically a person’s overarching financial health as a result of successful expense management. If they’re not scratching their head about their personal finances, that’s considered being financially healthy. The importance of being financially healthy cannot be overstated.
1. It Affects Employees’ Health
Being financially secure correlates to having better physiological health. For starters, a new survey by Bankrate pointed out that money worries are the biggest cause for sleep loss which impacts both mental and physical health. More than 30% of employees said in this report by PwC that financial worries have impacted their health in some form or other. Being preoccupied with anything other than work in manufacturing or high risk jobs may lead to high rates of accidents.
2. Financial Stress = Decreased Employee Performance
Money-related stress in employees has been linked to lower work performance. According to the Society for Human Resource Management, financial stress causes an estimated 34% increase in absenteeism and tardiness. 49% of employees find themselves spending more than 3 hours daily thinking about or dealing with personal financial issues. Sleep deprivation from trying to manage finances affects our health, as mentioned earlier, but it also impairs cognitive ability, making it harder for employees to think and make correct decisions, leading to longer turnaround time and a decrease in productivity.
3. Increase in Costs
Employees aren’t the only ones feeling it. Financial stressors affect employers just as much, if not more so. Employees that are under financial distractions are more likely to leave a company in search of higher compensation elsewhere, which increases costs in terms of hiring and training. The lost productivity, combined with increased turnover costs and other factors related to poor financial wellness, account for, on average, 11% to 14% of an employer’s payroll expense.
Employee Wellness Strategies
Attracting, retaining talents and maintaining a competitive edge in the marketplace are among the reasons organisations would want their employees to be financially literate and subsequently be in good financial health.
Some fun facts from the Financial Planning Attitudes Survey 2017 done by the MoneySense Council:
Only about 30% of millennials feel like they’re knowledgeable in investing
25% of millennials prefer to live in the moment than plan for the future
Less than half of millennials understand the significance of risk diversification
Only 43% of millennials say that they are well prepared financially for retirement
According to Workforce.com, employees welcome their employer’s involvement in helping them improve their financial fitness. Here are some strategies companies can consider.
1. Get Financial Education
Raising employee financial literacy is critical in boosting employee financial wellness. This can be done in various ways such as one-to-one financial counselling and financial workshops.
Financial workshops are a relatively low-cost method to create a basic financial wellness program. Companies can invite guest speakers to come in and speak about topics like setting up a retirement fund, general budget planning and managing credit responsibly. Financial counsellors can tremendously help employees who are having trouble meeting their ongoing expenses.
2. Implement Employee Benefits
Beyond education, employers can help relieve financial stress on the part of employees by offering benefits like healthcare coverage with different plans to suit different needs and contributions to said coverage. Retirement plans may not work as well in this day and age since employees rarely if ever stay with one organisation their entire careers, but having a retirement plan, perhaps with payroll deductions can make it easier for employees to plan for their future. Even little amenities like subsidised travel expenses, a casual dress code (casual clothes tend to be less expensive and don’t usually require dry cleaning) or flexible work schedule can go a long way.
3. Use Financial Wellness Tools
Adopting digital tools could be crucial to easing the financial stress that’s preventing employees from being the best they could be. Apps like StashAway lets people manage their money and learn how to grow their cash. This technology enables investing, risk diversification, saving and even planning for retirement, all at our fingertips.
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