Taking Financial Wellness to the Next Level

Taking Financial Wellness to the Next Level

August 02, 2023

Everyone wants to make and save money. But not everyone knows how to balance their budget for success.

Within the past decade, financial wellness programs burst onto the employee benefits scene to help tackle this issue. Now, employees want even more support to address their financial stress head-on.

According to PwC's 2022 Employee Financial Wellness Survey, approximately 56% of employees experience some form of stress related to their financial situation. Many spend time worrying about it at work, which can lead to bad habits, poor health and sick days. This, in turn, can harm productivity and your bottom line.

What is financial wellness?

The Consumer Financial Protection Bureau defines financial wellness as:

  • Control over day-to-day and month-to-month finances
  • Capacity to absorb a financial shock
  • Ability to remain on track to meet financial goals
  • Freedom to make choices that allow enjoyment of life

People who have achieved financial well-being do not live paycheck to paycheck or rack up credit card debt to cover everyday expenses or unexpected bills.

Rising debt

The statistics are clear. Americans are shouldering more debt and struggling to save. The HR software provider ADP says four in 10 employees live paycheck to paycheck.

Three main causes of concern are:

  • Credit cards: According to the Federal Reserve, the average credit card debt per household is more than $6,200. And around 45% of households carry credit card debt.
  • School loans: Over the past 20 years, average tuition and fees have soared. In 2022, the average student loan debt was around $30,000, says U.S. News & World Report.
  • Auto loans: Cars have become increasingly expensive. The average cost of a new vehicle was $47,000 heading into 2022. That's an increase of more than 25% in two years, according to Kelley Blue Book.

Educating employees

Financial wellness is a life skill. When you consider these statistics, it’s easy to see why employees are struggling to pay off debt and worrying about financial stability.

To help address the gap between planning for the future and understanding how to make good financial decisions on a daily basis, financial education is essential.

It’s not easily addressed in one-and-done courses. Employees want and need high-touch training like seminars and one-on-one coaching. They also expect access to resources to help them reach their goals.

According to the human resources association SHRM, only 22% of organizations offer group or classroom financial advice, 27% offer one-on-one advice and 24% offer employees online financial or investment advice. You can increase those percentages by teaching your employees the fundamentals of finance.

Many financial wellness programs fail to consider an employee’s lack of basic economic knowledge. Without this foundation, employees are less likely to adopt positive saving behavior, plan for retirement or have an emergency fund, says the Financial Industry Regulatory Authority.

You want to offer a program that focuses first on basic financial management skills. You might include lessons on:

  • Evaluating personal finances
  • Learning how to create a budget
  • Managing debt
  • Avoiding costly financial mistakes

Everyone thinks and relates to money differently. Employees will have unique goals. But informed decisions lead to positive behaviors.

Providing tools for success

You should offer a comprehensive, integrated program to support your employees’ financial success. The market is flush with financial planning software to help employees set goals and track their progress.

These tools can help individuals:

  • Pay off debt
  • Save for their children’s college education
  • Accumulate a down payment for a house
  • Plan for retirement

Access to financial advisers, coaches or planners can also help. Trained professionals can assist with more advanced techniques like evaluating current assets and investing for retirement.

Free online sites like investor.gov have resources such as calculators to determine compound interest, comparisons of mutual funds and estimators for Social Security benefits.

Regardless of the tools you select, supporting your employees through financial planning will encourage their continued fiscal responsibility.

Encouraging participation

Because of the personal and confidential nature of financial wellness programs, many employers struggle with getting employees to participate. Employees can be self-conscious about their lack of knowledge or intimidated by the topic. At the same time, they may complain the material is overwhelming or stressful.

To encourage involvement, you may want to offer financial incentives. Contributions to savings funds, retirement accounts or health savings accounts are all good ideas. (Be sure to follow all applicable tax laws if you go this route.) Matching funds already set aside by the employee rewards their commitment to building new habits.

You may also want to consider hosting events during work hours. Lunch-and-learn sessions are popular. Work with the vendors and insurance carriers sponsoring your current plans. Employees will note your support and appreciate that you are dedicating time during the day to help them meet their personal goals.

Thinking outside the box

It’s no secret that financial education can be boring. You want to drive participation with programs that help employees tackle short-term problems first and then move on to long-term success.

In addition to education about savings, investing and retirement, offer lessons on credit scores and loan consolidation. Employees struggling with debt can be prime targets for fraud. Help them understand what to look for in a solution provider.

You may also want to remind employees that insurance can improve financial wellness. Employer-sponsored plans like health, dental and vision coverage aren’t often overlooked. But what about disability and life insurance? Both plans can help protect employees and their dependents from financial disaster at a minimal cost.

Individual and voluntary options like pet insurance, long-term care, travel insurance and prepaid legal fees can all help prevent financial losses as well.

Automatic enrollment in your 401(k) plan is another way to help employees realize positive saving behavior. If you also apply automatic increases in savings each year, you may help employees reach their goals even faster.

Taking your plan to the next level

Financial wellness plans have never been more important. With rising debt and savings rates well below optimal levels, they can make a difference in your employees’ lives.

Encouraging financial literacy and providing the tools for financial planning can help your employees strategize. It can get them beyond the stress that economic issues may be causing in their lives. And it shows your concern for them outside the workplace.

For help taking your financial wellness plan to the next level, contact your broker or benefits adviser. They have the resources and contacts to develop a plan that will engage your employees and provide them with the skills to achieve financial success.