Financial health: Helping employees plan for short and long-term financial goals 

financial goals

Need to know:

  • The new year is a time for positive financial changes, and employers should embrace this, as monetary wellbeing translates directly into happiness and productivity. 
  • Rather than just focusing on pensions for the long-term, organisations should consider all aspects of financial wellbeing, including short-term items like loan repayments. 
  • Communications should be tailored, varied and targeted, to ensure they reach the widest audiences. 
  • Employees’ needs will change over time, and employers should ensure they are provided with an array of options for support. 

In the period following Christmas, employees are more likely than ever to face tightening purse strings. In turn, the start of the year is a popular time to plan for the future and make positive behavioural changes when it comes to money.  

The financial health of the workforce has direct and significant effects on the success of an organisation. The Employee financial wellbeing report, published in January 2017 by the Chartered Institute of Personnel and Development (CIPD), found financial worries had negatively affected productivity for 25% of employees. 

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Jeanette Makings, head of financial education at Close Brothers, says: “Positive financial wellbeing benefits employers in numerous ways, [including] increased engagement and productivity, lower absenteeism, and greater staff retention and loyalty. Improving the financial wellbeing of employees is a differentiator when recruiting talent and ensures more preparedness for retirement, allowing smoother succession planning and transitions.” 

It is therefore in the interest of every employer to help staff manage their money effectively and achieve their financial goals.  

Financial pillars

According to the Consumer Finance Protection Bureau, there are four pillars of financial wellness: control over day-to-day finances; preparing for the unexpected; freedom to make choices in life; and staying on track for the future. 

These pillars can help employers focus on the issues that mater, says Neil Atkinson, head of proposition at Thomsons Online Benefits: “[A] thematic approach can be applied regardless of age, levels of wealth and levels of engagement.” 

Budgeting tools and workplace lending can help employees to gain control over day-to-day finances and relieve the stress associated with bills or debt. Savings products, financial protection or flexible benefits can provide security against unexpected expenses. Guidance and financial health checks can give workers the freedom to make the right choices and better decisions. Finally, pensions play a key role in keeping employees on track for the future. 

Beyond the basics

Auto-enrolment means that every employer is now required by law to help staff with retirement savings. However, the rise of the multi-generational and job-hopping workforce means that pensions are no longer enough. 

“Employees, particularly younger ones, are battling rising rents, student debt, and inflating living costs, and can little imagine retiring,” Atkinson says. “We’re seeing an increasing number of employers offering student loans schemes, workplace [individual savings accounts (Isas)] and workplace loans, all designed to engage a cross-section of employees by helping them achieve shorter-term financial goals.” 

Employers should consider whether their benefits offering is conducive to sensible financial choices in the short term, particularly following the excesses of the festive season. For example, offering a discount scheme might be attractive, but could encourage employees to spend more money. 

Communication and education

Regardless of whether goals are immediate or long-term, education is key, says Ben Hollingdale, head of partnerships at Smarterly:  

“With short-term goals, such as looking to buy a house, [employees] need to understand how getting a mortgage works. Longer-term goals, such as retirement, require people to understand how total assets and liabilities will combine and contribute towards their retirement income.” 

Financial education needs to be tailored and targeted, in addition to reaching as many audiences as possible. Although face-to-face communication tends to be the most effective, it might not always be practical, so recorded webinars and videos can be integral. 

Short and long-term changes

Just as the new year is a time when employees are likely to be receptive to savings communications, timing is of the essence throughout the year, according to Peter Briffett, chief executive and co-founder of Wagestream.  

“Communicating with staff on the best ways to save when they’ve just been paid or explaining how payday loans cause more harm than good the week before payday will motivate staff to action healthy financial behaviour and fulfil goals, as they’ll already be in the right mindset,” he explains. 

In addition, employers should consider the long-term fluctuations in employees’ needs as the year goes on. A financial benefit that lacks relevance today might become suddenly integral tomorrow, notes Heidi Allan, head of employee wellbeing at Neyber. 

“It really is about signposting employees to options,” she explains. “Allowing flexibility for employees to utilise those options 24/7, 365 days a year means they can choose what’s right for them when life changes.”