What You Need to Know About Employee Financial Wellness

Introduction

Financial wellness is something that everyone
strives to achieve. Being in a position close to financial freedom can
alleviate many stresses that may come tied with financial burdens. With the
growing need for everyday living, financial wellness is not as easy as it was before. Student
debt is growing and the cost of living is not slowing down. This article will
discuss what you need to know about the importance of financial wellness and
how to go about achieving it in the times that we live in.

What is employee financial wellness?

Although people define employee financial wellness
differently from each other, there is a universal understanding of what financial wellness
should entail. Forbes (2020), defines financial wellness as a construct. Based
on this, financial
wellness can be defined as (out of 100%):

• 34%
  – not being stressed about their financial situation.
• 18%
  – remaining free from any debts.
• 16%
  – having enough savings and not remaining worried about unexpected expenses.
• 16%
  – having the financial freedom to make choices and enjoy their life.
• 12%
  – being able to meet daily and monthly expenses.
• 4%
  – being able to retire when they want to.

Statistics behind employee financial wellness

PWC researched employee financial wellness
in 2020 and some of the findings are found below:

 (PWC, 2020)

According to the
report, “more than one-third of full-time employed Millennials, Gen Xers, and
Baby Boomers, have less than $1,000 saved to deal with unexpected expenses”
(PWC, 2020). Looking at the current situation that the world has found itself
in, the COVID 19 pandemic, this finding becomes more important to look into.

(PWC, 2020)

Financial matters are
the top cause of stress in the workplace (PWC, 2020).

 (PWC, 2020)

According to research
conducted on employees from various sectors in the USA in 2019, some
interesting findings were noted. America is among the richest nations in the
world. As a result, one would believe that most employees there would be on the
road to financial freedom but the contrary is true. Below are some employee wellness statistics
from the research conducted:

• 24% of employees
  report that issues with personal finances have been a distraction
  at work.
• 29% of employees defined
  contribution participants report missing work to deal with the emotional stress
  caused by their finances.
• 47% of employees defined
  contribution participants strongly agree that they find themselves living
  paycheck to paycheck.
• 61% of employees U.S.
  workers lack a savings cushion of at least three months’
  expenses for emergencies.

Why should employees care about financial wellness?

Employees need to pay
attention to financial wellness as the stress that is linked to the financial
burdens is taking a toll on the workforce at large. This stress translates into
depression, sleepless nights, and even full-blown panic attacks, which in turn
increase absenteeism, reduce productivity, and fuel high employee turnover
(ej4, 2020).

The way of living as
significantly changed from the way it was before. Some points need that
employees need to pay attention to before they sink into a crisis is that:

• Many millennials are burdened
  with educational debt (especially university), more so than any other
  generation. As a result, a large amount of this demographic is starting off
  their careers, already sinking in debt.
• Baby Boomers are stressed
  as they still need to live with their children struggling to get by because of
  the debt they find themselves in after school. Also, they have to take care of
  their ageing parents.
• Increasing healthcare
  costs are another cause for concern for all generations.
• Lastly, the recession worldwide
  of the last decade wiped out huge chunks of people’s retirement portfolios,
  pushing back their retirement timelines even as people feared for their jobs.

How can you personally achieve financial wellness?

There are some
practices that you can do at an individual level to help with the stress that
comes with the financial burdens that can cause a threat to well-being. Here
are some ways in which employee
financial wellness can be achieved personally.

Make a budget - Depending on your
monthly income, expenditure, and savings, you can develop a budget that will
help you live with available resources. In case you face a shortage of money,
you can adjust your budget, but do not opt for credit cards. Any emergency
expenses can be covered with your savings but do not overspend or lend money.

Keep your spending in
check
- Once your budget is prepared, make a list of all the necessary items you
would want to purchase and spend accordingly. Also, keep a track of where you
are spending money regularly. If you frequently eat at restaurants, you can
maybe cut down your visits by one or two times to make sure you are not
overspending.

Be yourself as your
first payer
- When you receive your monthly paychecks, always set aside a fixed amount for
yourself. You can set-up automated deposits and consider it as one of your
payments.

Never make any major
purchase in haste
- If you are looking forward to making any major purchase, always plan for it systematically.
Adjust your budget and savings accordingly and do not break into your regular
savings fund. Even if you do, make sure you replenish it to ensure that your
savings don’t get affected.

Avoid going overboard
with your credit cards
- If you are using a credit card, use it wisely and plan your payments each
month. Always stick to a limit and do not overspend. When it comes to financial
wellbeing, a credit score is an important aspect. Delayed payments and higher
debts can affect your credit score.

How can employers put together a financial wellness programme for employees?

Although employers are
not usually the source of financial stress on their employees, they are in a
position where they can help their employees overcome these burdens. Some ways
in which employers can help employees in this area are noted below, as outlined
by ej4 (2020):

• Creating a Budget - Most
  people do not realise that their spending habits exceed their income. Learning
  to budget is a critical first step in reining in expenses and building wealth.
• Responsible Debt - Debt
  is the subject that gives people sleepless nights but is rarely discussed. Nobody
  wants to find themselves in debt but learning how to manage it responsibly sets
  one up for later success.
• Value of Saving - Our
  culture rewards having an “I want it now” attitude in consumers. If a person
  can master some simple ways to moderate their spending and stick to a savings
  plan, they will be better equipped to handle the bumps in the road of life.
• Understanding Credit
  Cards - A lot of debt in our culture accumulates because people do not
  understand what credit cards are for. It is easy to overspend, especially on
  non-essential items but paying it back is not as easy as it is to spend it. Simple
  education in how they work can save thousands over time.
• Employee Benefits -
  Educating employees about the benefits your company offers, it can go a long
  way to relieving financial stress and improve their job satisfaction.
• Financial
  wellness = Freedom from stress - Most employees think that
  financial wellness programs are designed to relieve their stress and they need
  not worry about expenses and finance. 81% of the respondents consider it
  freedom, which means that employers must help their employees find peace of
  mind through well-designed financial wellness programs. Freedom is the keyword here, and using it in the
  right manner will encourage your employees to better understand the financial
  wellness programs and use them to meet their goals (Koppr, 2020).

Conclusion

Financial
wellness is an important topic that needs to be in constant discussion.
Financial literacy is something that everyone needs to be a part of. This is a
part of life that everyone will experience and not many can avoid. Many
institutions, employers, employees and schools can help in turning this around.

Thandeka Madziwanyika
is a Consultant at Industrial Psychology Consultants (Pvt) Ltd, a management
and human resources consulting firm.

Phone +263 (242)
481946-48/481950 or

Cell number +263 78
318 0936 or

Email: thandeka@ipcconsultants.com or

Visit our website at
www.ipcconsultants.com.