19 Jul Financial Wellness Makes Good Cents
Why financial wellness?
Financial wellness is something you’ve likely heard about but possibly not paid it much attention. However, we are hearing more and more about this issue within the context of the workplace. All of us have likely experienced how finances can impact us; our relationships, our stress level, our happiness and more. All of these things can also have a deleterious effect on our job performance. Research has shown how stress can impact one’s job performance. According to an article by Help Guide, stress in the workplace can actually help people perform better in many situations; however, “when stress exceeds your ability to cope, it stops being helpful and starts causing damage to your mind and body—as well as to your job satisfaction”. While work in and of itself will inevitably cause stress at some point during one’s work life, having financial stress only adds to the problem and can thus impact the ability to perform at an optimal level.
A big income doesn’t automatically make you financially well.
Another issue to consider when thinking about financial wellness is the misperception identified by Smart About Money that “your income level and material possessions define your wealth”. However, a person with a large income might live paycheck to paycheck with an expensive lifestyle that limits his or her ability to accumulate wealth. Wealth isn’t defined by how much money you earn – it’s about how you grow and save your money to meet your changing life circumstances. There is no single definition of financial wellness, however Forbes seems to provide a more comprehensive definition, which is measured by a combination of factors, including the overall satisfaction with our current financial situation, actual financial behaviors (i.e., budgeting, saving, debt reduction), financial attitudes, financial knowledge, and objective financial status.
Employers could lose up to $250 billion a year in lost wages due to employees’ stress about their personal finances.
Why does this matter for employers?
So, what does this have to do with the workplace and benefits and retention of employees? According to a Mercer survey, employers could lose up to $250 billion a year in lost wages due to employees’ stress about their personal finances. The second installment of this survey, which was completed by 3000 workers, determined that the average time an employee spends worrying about personal finances while at work was 13 hours per month, and the median was five hours per month. In an article outlining the survey results, Think Advisor reports that employers offering financial wellness programs have over twice the job satisfaction and higher levels of trust than those without access to such a program.
Many younger workers, fresh out of college, may also come to the workplace with loan debt that only increases their stress and decreases their financial wellness. According to Consumer Reports, for many workers, especially millennials, college loan debt can be a bigger burden than credit card debt. The average loan balance grew to $28,650 in 2017, according to the Institute for College Access and Success, and almost half of workers say they want help with student loans.
What can you as an employer do about it?
Benefit professionals would be wise to consider all of these issues together as they plan their benefit design. There are a number of financial wellness programs that can be implemented, but with a cost. Shortlister identifies the top 20 programs for 2019. There are other ways to help address the issue of financial stress through benefit design. This could include how retirement plans are offered, including the time to become vested and matching funds from the employer. Financial coaching can be accessed from local financial advisors. Helping employees with student debt was deemed “the hottest employee benefit of 2018”, by Forbes. While these issues have likely always existed, it seems they were not as openly recognized, and or considered within the context of benefit design.
For more information or ideas on how you can incorporate financial wellness into your benefits or wellness design, please contact us!