Nearly half (46%) of all UK adults rate their own knowledge about financial matters as low and almost a quarter (24%) have little or no confidence in managing their money. The impact of this is clearly being felt in the workplace with research finding that employers believe that financial worries cause increased levels of stress and absenteeism amongst employees, and that it leads to lower productivity.
Increasing numbers of employers are now looking for ways to improve their employee’s financial wellbeing. Jonathan Watts-Lay, Director, WEALTH at work, outlines the top 5 key things to consider to build an effective financial wellbeing strategy.
1.) Start with the basics
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A big part of the solution is helping employees become more familiar with the basics of money management. Getting them to think about how they spend money on everyday items such as utility bills and insurance is essential. A great example of this is car insurance. It is extremely unlikely that you will get a better quote by remaining with your current provider than from shopping around, but many neglect to do this. Whilst some employees are becoming more aware of the advantages of shopping around, employers could still be doing more to inform and support their staff with basic money management.
2.) Good vs bad debt
Another important principle is helping employees understand the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure you have a good deal. At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. The cost of paying the interest may force someone into even greater financial difficulty.
3.) Develop an appealing savings package
It’s also important to look at the employee benefits platform itself. A good starting point is to investigate if employees are taking up and using the benefits on offer. And if not, why? Is it because the benefits aren’t appropriate to the workforce, or are employees unable to understand either the way the benefit operates, or how it could help them? Making sure benefits are relevant and well-explained can really help take-up and improve personal money management. For example, many employers offer discounts at various retailers through their voluntary benefits programme, yet take-up is often low. Everybody has to do the weekly shop, so a 5% saving on this for example, could then be used to help reduce debt or be put towards another workplace benefit such as a pension.
4.) Preparing for retirement
One of the most crucial elements of employee financial wellbeing is retirement preparation. Our research found that a staggering 80% of employers believe their employees are not saving enough for retirement. This may in part be because of affordability which is why money management is so important but in addition, it may be that they do not understand the upside such as employer matches on pension contributions and tax relief.
5.) Providing support
The answer to all this lies in providing employers with support around how best to manage their money, and the most successful way to do is through the provision of financial education, guidance or regulated advice. This approach can make sure that the savings effort really pays off and in turn, lead to a confident and financially empowered workforce.