There is no annual physical, no routine checkups, no emergency room. There’s no set schedule or resources for individuals to monitor and maintain their financial well-being.
Because of this ambiguity, the onus lies on each to be responsible for their financial wellness. With a multitude of other factors to worry about in life, financial wellness is often an afterthought.
According to a study by LIMRA, only 28 percent of respondents said they are very confident about their ability to make important financial decisions.
Not only are employees not confident in their ability, but they are also not confident in their actual finances. A 2016 study by Bank of America found that 75 percent of employees gave indications that they are not financially secure.
Financial wellness is a facet of employees lives that employers should consider when making benefits decisions. An individual’s financial wellness can have a direct impact on their professional success, which can subsequently affect their organization’s success.
What is financial wellness?
Financial wellness, as defined by Financial Finesse, is a state of well-being where an individual has achieved minimal financial stress, established a strong financial foundation, and created an ongoing plan to help reach future financial goals.
Financial wellness is important to your company because it has a direct impact on your employees. When an employee has poor financial wellness, other areas of their life suffer too.
Over half of employees say that they are stressed about their finances, according to a survey by PwC. Additionally, 45 percent say their worries have worsened over the past 12 months.
This stress can wreak havoc on an individual’s personal and professional life. And often the lines between these two worlds will begin to blur. Stress costs employers an average of $300 billion a year in stress-related health care and missed work.
How to improve financial wellness?
As an employer, there are a few steps you can take to nudge your employees along the path towards financial wellness. Here are five possible solutions.
1. Defined Contribution/Benefits Plan
One of the first and best methods of ensuring financial wellness is creating a defined contribution or benefits plan. Defined contribution plans, like a 401(k) allow employees tax benefits to save for their retirement.
Saving for retirement is important as it eases the burden that workers face when contemplating their future retirement. These plans offer tax-based incentives that make it worthwhile for employees to save, and to save sooner rather than later.
Some employers who offer a defined contribution plan may struggle with getting their employees to participate in the program. A way to boost participation in these plans is to have your employees opt out rather than opt in.
Opting out means that, upon their hire, an employee is automatically enrolled in the contribution plan. This automatic enrollment means that employees have to opt out of the contribution plan or they will stay enrolled in it as long as they’re employed.
2. Healthcare Savings Education
Unsurprisingly, offering health insurance to your employees helps them to avoid debt that stems from the cost of health care. Still, health insurance does not solve all medical-related financial problems.
Last year, one in five working-age Americans with insurance experienced problems paying medical bills. Additionally, during the past year, 31 percent of Americans took money out of retirement, college, or other long-term savings accounts to pay medical bills.
These statistics elaborate the need that employees have for medical cost planning and education. Even with insurance, today’s medical landscape has pushed individuals to be smarter health care consumers.
Understanding the differences in plan types, providers, HSA, and FSAs is of the utmost importance. Educating your employees on these differences can help your employees from withdrawing money from other accounts, or going into debt.
3. Tailored Financial Education
Automated and online options are easy, quick, and relatively inexpensive, but they do not provide the same level of service and relevance that a customized financial education plan does.
When training is customized to meet an individual’s needs is when it becomes especially useful. Employees do not want to listen to information that is irrelevant to their particular situation.
This tool is also valuable because it is a differentiator that very few other companies have. According to BenefitsPro, only 35 percent of employers offer this kind of specialized educational training.
4. Debt Management Tools
Unfortunately, one of the constants in today’s society is debt. There are; however, a good kind of debt (such as a home mortgage) and a bad kind (such as a credit card). Your employees whether they are willing to admit it or not, need help to manage their debt.
According to a study by the Alliant Credit Union, 37 percent of respondents said that paying off credit card debt is one of their top financial goals. Additionally, 22 percent stated that their top goal was just staying afloat with debt obligations.
Credit card debt especially prevalent in the U.S. As of December 2016, the average U.S. credit card debt reached $16,061, according to NerdWallet. Employees need to learn to minimize this kind of negative debt.
A program to help employees manage their debt would aid employees in reducing and properly managing this kind of bad debt. This management, in turn, would contribute to reducing the stress and distraction caused by looming debt.
5. College Savings/ Student Loan Debt Repayment
College debt is another large form of debt in this country. While student loans (unlike credit cards) are a form of good debt, the sheer amount the average person accumulates is staggering and can be a real burden.
The average 2016 graduate will leave college with $37,172 of debt, which is up 6 percent from last year. As a whole, Americans owe almost $1.3 trillion in student loan debt.
College savings accounts and student loan debt repayment are two tools your company can offer that will help your employees manage this source of debt. Both of these tools help to alleviate the pressure that accompanies paying for college.
Every year since 2007, according to the American Psychological Association started its “Stress in America” report, Americans have named money as their top source of stress every year.
It is clear that money is a primary source of negative stress. This stress has a direct, negative, impact on employee productivity, satisfaction, and engagement.
According to a 2014 survey by PwC, around one out of four employees say that their finances have been a distraction at work. To free your staff from this potential burden, you need to support their financial wellness.
Not only is financial wellness the “right thing” to do, but it is also financially significant. SHRM estimates that employers can save up to $3 for every dollar spent on financial wellness programs.
Clearly, the best decision both on a personal and business level is financial wellness. So when faced with the choice don’t throw financial wellness down the well.