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Focusing on Financial Wellbeing is Key to Improving Total Wellbeing

High inflation and talk of a recession have many Americans worrying about their financial future.

As inflation rates have risen over the last year, Americans are becoming increasingly dissatisfied with their finances. As debt grows, 51% of households say they either have no emergency savings or just enough to cover three months of expenses.

For many employers, the personal finances of their employees have been the proverbial third rail of Human Resources. Most companies have been trained to avoid this topic in the workplace and the reasons have been many, including it’s too personal, too complicated, and too legally risky. The impact of personal finances on the employee, however, can no longer be ignored.

With the increased pressure the economy and rising health care costs have placed on employees’ financial status and stress, this added challenge is playing out in the workplace and affecting stress levels.

Financially stressed employees are twice as likely to be looking for another job and six times more likely to say their financial situation has severely impacted their productivity at work.*

The stress and worry employees feel over their personal finances can have a direct effect on their overall wellbeing and performance at work leading to:

  • Poor Engagement and Morale
  • Increase in Overtime
  • Production Delays
  • Customer Inconvenience
  • Increased Turnover and Replacement Costs
  • Increased Accidents

As a result, as employers begin to understand this connection, experts in retirement services see employers taking a greater interest and action in promoting financial wellbeing today. Total wellbeing considers the physical; social/emotional; financial; community; and environment. Each component alone can have a direct impact on an employee. All areas of personal wellbeing get a boost when financial wellbeing improves, as all pillars of wellbeing are interconnected.

At the employee level, small day-to-day decisions about finances, including how one thinks about the purpose of money, can make a big difference in overall health and wellness, leading to greater opportunities. At the company level, a workplace filled with engaged employees will certainly gain tremendous value from supporting financial education and voluntary benefits, which are valuable to their workforce.

Forward-thinking companies have begun to take proactive steps to help their employees make better financial decisions, reduce their stress, and improve their workplace productivity. For those companies who want to help but continue to harbor concerns about the legal risk involved, drawing a parallel between physical and financial wellness may offer a great perspective.

Boosting Financial Wellbeing is Key to Improving Total Health and Wellbeing

For years, companies have sponsored workplace wellness programs to help employees make better decisions about their health and many have enacted rewards to help provide that extra incentive. What makes the topic of financial wellbeing different? Financial wellness is a common sense component to any total wellbeing program since studies have directly connected an individual’s financial stress and health issues, such as anxiety and depression. The unfortunate facts are that if employees do not receive any form of financial education at their places of employment, they are unlikely to receive them anywhere else.

MJ Gross with OneDigital’s Retirement + Wealth practice asserts that,

“Financial wellness can be life-changing if directed at the right person, at the right time and communicated in the right way.”

Gross emphasizes how the effective financial wellness program cannot afford to be one-dimensional. Financial wellness to a new hire in their early 20s may consist of helping them prioritize between general savings, retirement savings, HSAs and paying down student loans. For an older employee, the focus might be more on retirement. Regardless of where the employee is on the saving spectrum, showing an interest in an employee’s financial wellbeing will help to reduce the stress that might be caused by financial concerns.

Strategies for Delivering Financial Education

There are a number of effective – and legally safe – ways to sponsor financial education that are low-cost and will have a positive impact on your employee’s financial wellbeing. The key is to sponsor programs that offer guidance instead of advice. Personal financial advice is still best delivered by professionals who are licensed to provide your employees with customized solutions. Here are a few suggested areas that employers might consider:

  1. Encourage employees to fully utilize the company’s 401k plan.

    Encouraging employees to begin to save for their retirement by leveraging the tax advantages and possible matching contributions of their existing 401k plan is a great way to begin to establish lifelong saving habits.

  2. Provide workshops that address basic financial wellness.

    These workshops can include topics such as the basics of developing a personal budget, managing student loans, how mortgages work, consolidating debt, and how to manage credit cards, to name a few. These workshops can be offered on a voluntary basis as an added benefit to employees.

  3. Utilize outside talent and expertise.

    It is important to remember that you don’t have to have all the answers or possess all of the knowledge. In every community, there are numerous services anxious to help educate your employees. Your 401k plan administrator or investment advisor can be excellent resource for expert presenters. Leverage these resources to ensure that your employees get the best possible guidance.

  4. Sponsor group sessions.

    Many companies have experienced great success by segmenting employees with similar challenges into support groups. This approach assumes that employees learn best when they share a common challenge. For example, employees can be organized into groups based on factors, such as:

    • First-time homeowners
    • Employees with large student loan debts
    • Recently divorced or widowed employees
    • Single parents
    • Employees preparing for retirement in 5 to 10 years

  5. Mentoring programs.

    Some employees prefer confidentiality, and some topics are best addressed on an individual basis. Aligning volunteer employees who have experienced and conquered similar challenges in a one-on-one setting can be extremely effective.

  6. Help employees make informed decisions about their company benefits.

    Despite the best efforts of their employers, most employees remain very confused about what benefit plans they should participate in. Helping employees see beyond just the premiums when choosing a health plan or the importance of insuring against the loss of their income by enrolling in Short-Term and/or Long-Term disability programs can have long-term personal financial implications.

Just like in matters involving the management of their physical health, employees must be motivated to take an active role in learning about personal finance and making the necessary changes to improve their financial health. Companies can – and should – play a larger role in sponsoring programs that provide their employees with the resources they need to change the financial direction of their lives. Making employee communications a priority can drive awareness and participation in the existing benefits and new programs. Access to information when needed and participation will build toward financial well-being, which ultimately increases engagement and productivity.

For companies looking for new ways to improve employee engagement, enhance benefit programs, and improve productivity, careful consideration should be given to filling the urgent need for financial education.

*According to PwC's 2023 Employee Financial Wellness Survey

To learn more about the impact employers can make on employee financial wellbeing, read saving for the future or visit OneDigital’s Retirement + Wealth page to connect with a consultant and start the journey to organizational financial wellbeing.