January 02, 2024
by Manisha Thakor
Summary. When an individual has financial health, they experience greater overall well-being and bring their best selves to the workplace. Unfortunately, 80% of employees report being financially stressed, and only 28% of employers offer financial wellness programs. Today’s workers must navigate complicated benefits packages and make critical decisions about their personal finances with limited or no guidance from their employers. This article discusses three steps you as an employer can take to boost the financial health of your employees and alleviate money-related stress and distractions: 1) take an “ecosystem” approach to employees’ financial health, 2) help employees effectively navigate benefits, and 3) recruit an external firm or in-house expert to provide education on financial well-being.
. . .
You may not realize it, but many of your employees are in financial distress. And they need your help.
According to a 2022 survey by the National Endowment for Financial Education (NEFE), 35% of U.S. adults say they are “just getting by financially” and worry that their money won’t last. Money worries have become so distracting, says benefits consulting firm Financial Finesse, that 80% of U.S. employees queried between 2021 and 2022 report at least “some level of financial stress,” with 27% experiencing “high or overwhelming” stress.
All that stress is not only harmful to your employees’ mental and physical health; it can be lethal to your bottom line. A 2023 report by the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) found that employees spend an average of eight hours a week dealing with financial issues — with four of those hours occurring at work.
“Employee financial stress is at the greatest level it’s been since the Great Recession,” says Financial Finesse founder and CEO Liz Davidson. Employer-sponsored financial wellness programs are no longer simply nice to have, she says. They’ve become an “imperative.”
Of course, the first step in addressing money stress is to ensure your staff is compensated properly. But if you want to become a stand-out employer, one of the most effective HR benefits you can provide is a base layer of what I call “financial health.”
Studies show that when an individual has financial health — that is, when their basic financial needs are met and they have a clear picture of how their financial choices and decisions impact their lives — they experience greater overall well-being and bring their best selves to the workplace.
Unfortunately, even though 77% of workers view financial wellness programs as an important benefit, only 28% of employers offer them, according to a 2023 Transamerica Institute report. This is a huge missed opportunity.
This article describes three steps you can take today to boost the financial health of your employees.
Step 1. Acknowledge that financial health requires an “ecosystem” approach.
In order to attract and retain top staff, says Billy Hensley, CEO of NEFE, a nonprofit for which I sit on the Board of Trustees, it is essential to think of your benefits offerings within the scope of a “personal finance ecosystem.”
“Single, tactical solutions cannot work by themselves,” Hensley says. “If it was just about more money or more education, we would’ve solved the problem already.” Instead, he suggests applying an ecosystem approach. In this model, when you’re making decisions about benefits, it’s not about blanket policies. Rather, take the time to consider factors that are unique to each of your employees — their financial knowledge, cultural influences, socioeconomic status, mindset, overall physical health, where they live, and any other elements that may contribute to their overall financial well-being.
If you want to support your employees to achieve better financial health, then considering their overarching personal finance ecosystem can be a game changer. Acknowledging your employees’ unique experiences and lifestyles lets you take a more nuanced and tailored approach to identifying benefits that would best serve them.
For example, offering more financial education can help your employees to choose among health care plans, but they may also need the flexibility of hybrid work or no-meeting Mondays to manage a stressful situation they are dealing with. Taking an ecosystem approach, explains Hensley, means trusting your employees to “own their work and manage their schedules in a way that works better for their lifestyles and their families.” That way, if something major does happen — they lose their house in a fire, their child is struggling and they need to be home for a period of time, or they have eldercare responsibilities — they can trust you will continue giving them that sense of financial well-being, and you can trust they’ll remain accountable for the work you’re paying them to do.
“People want to do meaningful, good work,” Hensley says. “They want to be productive. But they also want to be in an environment where they know they can grow, to feel like they have someone investing in and caring for them.”
Step 2. Develop effective ways for your employees to choose from and maximize the benefits you’re providing.
Just because your staff is competent at their jobs doesn’t mean they understand how to maximize their benefit options. For example, how can a new employee determine which 401(k) funds are right for their situation when a major investment firm has an average of 27 options? Or take health insurance: HMO or PPO? Bronze, silver, or gold plan? High or low deductible? And how does a Health Savings Account work again? The factors to consider around benefits can feel utterly overwhelming, especially when U.S. workers lack basic financial literacy.
“In my years of conducting research and speaking with a diverse range of workers, including some with advanced degrees, I’m often taken aback by the widespread lack of knowledge,” says Catherine Collinson, president and CEO of the Transamerica Institute and Transamerica Center for Retirement Studies. “In many states, financial literacy is not yet a requirement in public high schools, so if individuals didn’t seek out this education, they likely never received it.”
A recent Institute report finds, for example, that among workers who have even attempted to estimate how much money they will need to save in order to retire, 45% simply “guessed” the amount and just 29% have a written plan for how to achieve it.
Hensley notes that while most HR departments do their best to explain their firm’s benefits and encourage staff to ask for help, that typically occurs during the first week of employment when a new hire is already facing a flood of information about performing their actual jobs.
“I don’t know that a lot of employers are actually setting aside enough paid time in the early days for workers to really sit through the webinars, digest the information, make a list of questions,” Hensley says. “And then you need to give them periodic check-ins throughout the year.”
Check-ins can be as simple as FAQs or briefs in a company newsletter on such topics as, “Health Savings Account vs. traditional HMO: What are the tax benefits?” You can also ask your health care provider to offer trainings that walk your staff through real-life scenarios they may face — like how to distinguish among different plans if you’re going to have a baby or if you become diabetic.
An ongoing, open dialogue between staff and HR creates the necessary feedback loop for your employees to ask about anything they wish they knew more about. After all, if they are using four hours a week on the job to manage their personal financial issues, as previously noted, then three or four days at the start of a new career and a couple of days a year in upkeep is a tremendous bargain.
Step 3. Hire an external, unbiased firm (or designate an in-house expert) to help educate your employees on achieving financial well-being.
On average, employee benefits cost employers between 30–40% of the average worker’s base salary. Given this steep price tag, it’s common business sense to strive for the maximum ROI on this expenditure.
A study in the June 2023 issue of the Journal of Financial Literacy and Wellbeing found that a well-designed financial education program can remove at least one hour per week of worry and financial distress for each employee who participates in that program. Assuming a minimum wage of $15 per hour, at a company with 30 minimum-wage employees, a good program can recover at least $22,500 of value per year.
What’s key is to find unbiased education and guidance from financial-health consultants that are not associated with the sale of any specific financial products. When considering this type of outside provider, look for firms that offer live service during business hours as well as on-demand resources such as a video libraries, internally written articles, and curated lists of web resources that address common financial well-being topics. For example, Financial Finesse, a trailblazer in this realm, provides a team of certified financial coaches and CFPs who can consult with employees on the phone, in a chat, or in person. For a smaller company that may not be able to afford a comprehensive program, boutique firms, like Financial Wellness Strategies, can provide tailored programming on an as-needed basis.
Noted economist Annamaria Lusardi, a senior fellow at the Stanford Institute for Economic Policy Research (SIEPR) and founder and academic director of GFLEC, says that this level of investment in your staff’s financial well-being shouldn’t be viewed as “charity.” Rather, it’s a smart way to “retain and attract workers and make them more financially healthy and productive.”
Lusardi recommends that best-in-class financial wellness programs cover these seven essential topics:
“It’s very important for financial wellness programs to be holistic and cover many financial decisions, not just saving for retirement,” Lusardi says. “Because the ultimate objective of managing your finances is to feel well, to take care of your family.”
. . .
Today’s workers, at all titles and income levels, are often expected to figure out key components of their personal finances with limited or no guidance from their employers. By practicing these three steps toward financial health, you can alleviate the stress and distractions that prevent your staff from being productive, happy, and loyal employees.
