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:
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.
Financial matters are the top cause of stress in the workplace (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).
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
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Visit our website at www.ipcconsultants.com.