Financial wellbeing is often misunderstood. This article will reveal the five myths of financial wellbeing that hold organisations from viewing it as a priority.
Myth 1: Financial education is the same as financial wellbeing
Financial education and financial wellbeing both play an important role in a holistic financial wellbeing strategy but are not the same.
- Financial education – gives you the knowledge and tools to understand your finances (calculating APR’s, doing budgeting and planning).
- Financial wellbeing – is all about your behaviours, spending, borrowing and saving habits and how they make you feel (low-interest salary-linked loans, salary-linked savings, on demand pay).
Myth 2: Finances are a personal matter. There is not much an employer can do to help.
The taboos around mental health are being broken down, but financial health still remains stigmatised in society. Financial health is a problem for employers and one that actually can and should be fixed. The financial health of your employees will impact all aspects of your business.
40% of people are worried about money. These people are:
- 880% more likely to have sleepless nights
- 760% more likely to not to be able to finish daily tasks
- 600% more likely to have a lower quality of work
- 220% more likely to be looking for a new job
Our research has found that the cost to businesses in lost productivity, absenteeism, increased leaver rate and training costs is 13-17% of payroll.
Myth 3: We already have a mental health strategy. We don’t need a financial wellbeing one.
Financial wellbeing is actually a major driving force behind a person’s overall wellbeing and has a big influence over mental health. Without having a proper financial wellbeing strategy in place, other mental health strategies will be undermined. The shocking findings from our 2018/19 survey revealed that those with financial worries are:
- 380% more likely to suffer from anxiety and panic attacks
- 470% more likely to be depressed
Myth 4: Financial wellbeing is linked to earnings
In reality, poor financial wellbeing impacts people across all pay levels. Those with the highest levels of pay are experiencing high levels of stress related to finances. Our research has found that 33% of those employees that earn more than £60,000 annually are regularly running out of money. Those who are earning the most have the same levels of stress as those earning the least. If people don’t have a savings buffer, they are more likely to fall back on short-term, high-cost debt such as credit cards, overdrafts or payday loans.
Myth 5: Financial problems are an issue for a small amount of people
Financial wellbeing impacts everyone. Although literacy plays a role, financial wellbeing actually to do with a complex mix of socio-economic and cultural factors that shape our attitudes and behaviours towards money.
Salary Finance use a Financial Fitness Score from 1-5, based on 10 behavioural questions, to measure employees’ levels of financial wellbeing. Even though the average UK score is 3.1, the highest percentages lies at score 2 and score 4. These groups behave very differently.
- 2s are just about getting by and find it easier to spend than save
- 4s have a financial plan in place and are choosing to save rather than spend
How can we break the cycle of debt?
If an employee has a less-than-perfect credit score they will struggle to get a low-cost bank loan and will rely on credit cards, pawn shops and 500%+ payday loans for borrowing. Without the ability to pay-off debts, they will be stuck in a financial prison.
Salary-linked loans and savings can create the opportunity to break the cycle of debt and get people on the road to financial fitness.
For more information on how to build your financial wellbeing strategy download our guide on this topic.