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Financial wellness is the definition of managing your own personal finances and doing it successfully without any added stress or hardship. Money is crucial to our day-to-day lives and if we can’t manage our money it can be detrimental both in and out of work. Understanding financial wellness is a learning curve and is something that hasn’t been entirely prioritised within all people agendas.
According to a recent Barclay’s report, 46% of employees worry about their finances, only 35% feel positive about their financial future and 18% lose sleep because they are stressed about money.
We spoke to Jason Butler, Head of Financial Education at Salary Finance. Jason has spent 25 years as a financial advisor before deciding, in 2015, to focus on personal financial wellbeing. He spoke with HRD Connect about why he thinks business leaders need to entirely focus on educating their employees, successfully differentiating between ‘good’ debt and ‘bad’ debt and how by addressing these sometimes uncomfortable issues you could see a soar in productivity.
What do you think are the biggest obstacles people face with their own personal finance? Everyone is different but the research and my own experience suggests that the three biggest obstacles are:
A lack of basic numeracy skills and competence leading to low money confidence and bad financial deals.
Behavioural bias, emotionally based impulses and habits that cause us to make poor financial decisions.
The higher value we usually place on enjoyment today compared to deferring gratification to the medium to long-term.
What would be the best way for business leaders to educate their workforce about financial wellness? There is no magic one size fits all solution. Business leaders first need to make sure that overall wellness, of which money is one (but very big) component, is a key governance issue that someone in the leadership team takes responsibility for.
Some employers have carried out an anonymous staff survey of their wellness needs (mental, physical and financial), to help inform what issues staff are most concerned about. At the very least, making available to staff engaging, useful and relevant communication material (videos, blogs, infographics, podcasts) and helpful tools (budget planer and other calculators) is a start.
Then make available low-cost salary linked loans, savings from payroll and opportunities to help reduce the cost of work (child care, social events, travel). The most effective thing employers can do is to develop internal ‘financial ambassadors’. These are employees who perhaps have a greater level of financial capability, awareness and interest, who can act as trusted advocates for being better with money. This can be achieved by a firm working with an outside financial wellness company (like Salary Finance) to help equip, empower and support these small group of staff to be able to disseminate financial knowledge, understanding and concepts either informally or formally (such as workshops or talks).
What are the common misconceptions you come across?
Many in senior leadership roles are unaware just how much stress and anxiety their employees experience in relation to money. Research shows it is one of, if not the biggest, cause of concern. There is also a widely held misconception that helping staff to develop basic and highly generic money attitudes, skills and habits might stray into giving personal financial advice.
There is a very clear and easy way to understand the difference between disseminating acceptable money management principles, i.e. ‘rules of the financial road’ and tailored and highly personal tactics, i.e. ‘you should buy this investment or mortgage’.
“When we polled employers at a recent Salary Finance webinar, the number one reason employers hadn’t covered financial wellbeing was due to lack of understanding and confidence of the issue.”
Do you think there are any simple ways to destigmatise debt? I’m not sure there is a stigma about debt, or we wouldn’t have the massive level of unsecured and very expensive debt we see in the UK. I think we need to accept that people have debt for all sorts of reasons but there is a big difference between ‘good’ and ‘bad’ debt. Employers should be making employees aware of the difference between these two types of debt and how to…
a) Decreasing bad debt b) Avoid taking it on in the future.
At the very least employers MUST be signposting employees who have problem debt (unable to keep up with repayments) to free debt advice services.
Why isn’t financial education on every people agenda? It varies from employer to employer, but one reason could be because those in senior leadership positions may not have the same money worries and problems that their staff have. When we polled employers at a recent Salary Finance webinar, the number one reason employers hadn’t covered financial wellbeing was due to lack of understanding and confidence of the issue.
This is where organisations like Salary Finance can be of great help. In my role as Head of Financial Education at Salary Finance, I have read over 100 behavioural finance and money psychology books, several hundred research papers, spoken to thousands of people about money and am on first name terms with many of the leading research academics in this field. Employers can tap into that expertise without charge, as part of our core loan and savings platform benefit.
In an ideal world – how would financial wellness be approached? Start slowly, simply and consistently with basic communication of the key issues and then gradually build on that activity with salary linked benefits, money talks and workshops, and develop internal financial ambassadors. If there is a budget, consider rolling out a digital financial wellbeing platform to help employees with their daily money decisions, once the other foundations are in place.
What would you say to business leaders who are apprehensive about talking to employees about their own financial wellness? I understand your reticence, but if you don’t address this issue, your business is likely to be less competitive than the business that do embrace financial wellness. Firms that get financial wellness right should see higher staff productivity, lower attrition and lower staff turnover. Indeed, research analysis by Kennedy Harvard Business School showed that employers that had introduced Salary Finance to their staff saw a 28% reduction in absenteeism, and happier staff usually make for happier customers.
What would be your key advice to those struggling under financial pressures? Don’t ignore the problem, it will only get worse. And whatever you do, don’t keep extending your debt to defer the issue. Check you are getting all the State benefits you are entitled to at this website. Contact your local Citizen Advice Bureau or debt charity Step Change to get help sorting out any problem debts.