employee financial wellness
Management & Mindset

Why It Pays Off to Invest in Employee Financial Wellness

Almost everyone knows what it’s like to experience financial stress. Not having the resources to meet your goals or needs affects everything you do, and it isn’t uncommon for employees to bring their worries into the workplace. Anxious employees are more likely to make mistakes.

Money stress isn’t limited to people in dire situations. For example, your employees may make regular student loan payments, but if they’re only paying off their interest, they'll never be free from debt. Many of your employees may simply not know how to budget, save, or build credit.

For years, your employees have benefited your company through their labor. In return, employers have supported their employees' well-being through compensation and benefits.

But should employers help manage their employees' finances on top of it all? We think that yes, they should.

Employers should invest in their employees' financial goals with perks, raises, and education to improve their overall well-being. When employees experience less financial stress, they benefit from increased productivity, a lower turnover rate, and much, much more.

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How money stress affects employees

Money makes the world go around. When your employees don’t have enough of it, whether due to low wages, a stagnant economy, or poor financial decisions, their world stops turning. 

Work and money is a constant source of stress for many Americans. According to the American Psychological Association, 72% of adults feel stressed about money at least some of the time.

22% of Americans experience extreme financial stress, which causes poor health outcomes. Many Americans have skipped a doctor's visit due to financial concerns. Lower-income households are also more likely to engage in unhealthy behaviors to manage stress.

Americans who don’t have a grasp on finances are more likely to avoid them. As stress accumulates, 37% of employees spend three or more hours at work a week thinking about their finances. At the same time, 37% of employees have to leave work due to a financial emergency.

Stress is distracting. Employees who aren’t focused on their work are less productive. Lack of sleep, family stress, and financial concerns are all negatively associated with productivity. 

Financial problems further exacerbate sleep disturbances and relationship issues. 

With that said, money stress and issues surrounding money anxiety or insecurity can’t be improved unless employees are coached on how to take care of their finances.

As stress accumulates, 37% of employees spend three or more hours at work a week thinking about their finances.

Why financial education is necessary

While yes, making more money can solve most of our problems, any lottery winner will tell you a sudden influx of cash doesn’t make us better savers. 

An MIT study found that people who win the lottery are more likely to declare Chapter 7 bankruptcy within three to five years than the average American. 

Every person on this earth could win $60 million right now and live the rest of their life without a care, so why do lottery winners have a hard time holding on to their money? Is it greed?

Sure, greed plays a part, but if they were financially literate, they might have made better choices. However, most people who play the lottery aren’t often educated about money matters.

Financial literacy in America is at an all-time low, as indicated by the following statistics:

  • 53% of adults aren’t just financially literate, but they’re stressed about it.
  • 66% of American families don’t have an emergency fund.
  • 40% of adults don’t know how to keep a budget.
  • 80% of youths failed a financial literacy quiz.
  • 60% of adults currently have credit card debt.

Did you know you’re more likely to be struck by lightning than win the lottery? You have a 1 in a 292.2 million chance to win the Powerball but a 1 in 58,669 chance of dying in a cataclysmic storm. Most people would say your risk of being struck or killed in a storm is rare.

But, winning the lottery is rarer, and yet, millions of people spend $5 daily on lottery tickets. However, if your employees took that $5 and put it in the stock market, the chance of them earning high returns on their investments is much, much greater than winning the lottery. 

Most people are financially illiterate and need guidance with financial matters, and you can help them through collaborative learning, self-assessments, and budgeting tools.

Most people are financially illiterate and need guidance with financial matters, and you can help them through collaborative learning, self-assessments, and budgeting tools.

How to improve employee financial knowledge

Your employees likely learned everything they know about finances from school, the media, and their family members. You can also help them by creating a course of your own. 

1. Financial self-assessment quizzes

Some employees spend more per month than they think, but a test can determine if that’s the case. A financial self-assessment can help you understand what triggers spending, how much they already know about finances, and what gaps you need to fill in their learning. 

2. Webinars, classes, and collaborative learning

There’s no shortage of high-quality teaching materials. You can use articles, podcasts, online programs, books, websites, and classes. To increase knowledge retention and diversification, consider adopting a Collaborative Learning approach instead of solely focusing on synchronous learning or off-the-shelf content.

3. Budgeting tools and calculators

Several free tools, like retirement saving calculators, can help your employees see the benefits of investing in real-time. Budgeting tools also help them predict their Social Security payment, rent, and utility payments and measure how much loose cash is available to them for savings.

4. Hire a financial counselor

If you’re uncomfortable teaching a class, hire a counselor instead. A professional financial counselor can come in to teach a lesson, or they can meet individually with your employees. If there’s a large amount of interest in your program, consider running your course once a year.

5. Include health insurance education

Some employees can get more from their benefits without breaking the bank. At the minimum, you should cover how to look for in-network providers, why frequent doctor visits cut back on your overall health care costs, and what Medicaid programs provide the most benefits. 

The benefits of investing in employee financial wellness

By investing in your employees, you invest in your organization. Here are seven ways your company will benefit after implementing an employee financial wellness program.

1. Increased productivity

96% of employers report that personal financial issues affect their employees' overall job performance. From staring into space to missing work, finances distract your employees. By investing in employee financial wellness, you benefit from an 83% rise in productivity.

2. Saves money

Benefits are expensive, and it’s likely that health coverage consumes most of the budget. But, a financial wellness program doesn’t have to be costly. A curriculum could take a day to prepare and a day to teach (if you opt for a synchronous session), but the benefits are massive. Productive employees are more profitable.

3. Lowers turnover

Poor savers will quickly jump ship the moment they have another opportunity. If employees are paid more or are taught to save, they’re less likely to look for another job. 56% of employees who engaged with their financial wellness program were more likely to stay with their company, according to a report from market research firm Ernst & Young. 

4. Work-life balance

A healthy work-life balance is essential to your employees. When finances affect your employee's health, they’re less likely to enjoy their off-time or engage in their hobbies. By investing in growth, employees will enjoy coming to work and make the best of their off-time.

5. Builds trust

When employees are cared for, they trust their employers more. However, most employees have a love-hate relationship with their employers because they feel their superiors don’t care about them. Investing in your employees' financial wellness can do a lot to change this.

6. A better future for all

Financial literacy is passed on from parent to child, friend to friend. Employees who learn how to manage money pass it on to their friends and families, which leads to a more financially secure future. Plus, parents that teach their children to save are more likely to have a better retirement.

Financial education saves you money

Financial security is important to everyone, but not all of us have the resources, education, or time to invest in ourselves. By investing in your employees' financial futures, you help close the gap on wealth inequality, improve productivity within your business, and increase your ROI.

Although raises can benefit your employees in the short term, they do little to fix financial literacy in the long term. With the right tools, you can create an environment that keeps employee engagement high and program drop-outs low. 

When your employees see the amount of care, passion, and effort you’re willing to place in their overall growth and development, they’re more likely to remain loyal to you and your business.

Related: Why Not Sharing Institutional Knowledge is Costing Your Company Money