- What is financial wellness?
- Why are employees financially stressed?
- Elements of financial wellness
- Why is financial wellness important?
One such creative method for your employees can be making your employees aware of their financial wellness.
What is financial wellness?
In very simple terms, financial wellness means the art of efficiently and successfully managing one’s economic life. Financial wellness is a combination of knowledge about your finances, making good financial decisions and consolidating financial decisions into other important aspects of your life. Moreover, financial wellness means the capability of managing efficiently the short term finances and making preparations for achieving long term goals simultaneously. Money plays a very important role in our lives and it has to be managed in a very wise manner.
The very simple concept of financial wellness encloses some of the below-mentioned major factors.
1. Making a proper budget and spending according to the budget.
2. Keeping a concrete track of expenses.
3. Being prepared financially for any kind of emergency.
4. Having a perfect plan for the future.
5. Being well-informed about the information which can be used in making correct financial decisions.
Signs of Financial Wellness
Some of the major signs of financial wellness can be listed below such as
1. Having sufficient money to meet the necessities.
2. Being able to afford medical and health care facilities.
3. Sufficient savings for post-retirement life.
4. Being able to afford a good living standard.
5. Complete control over one’s own financial situation.
6. The level of financial stress is low.
However, the fundamental concept of financial wellness is financial security which is one of the most common motives of employees all over. So, it becomes quite important for you to impart knowledge about financial wellness and financial security to your employees.
This would help your millennial employees in making judicious plans for the achievement of their long-term financial goals and would even lower their levels of financial stress.
Read the complete guide to financial wellness for your employees
Why are employees financially stressed?
Financial stress is one of the major factors of stress with the employees in most organizations today. Challenges in debt re-payment, cash flows, monthly expenditure management, no adequate retirement planning, etc. are some of the major financial challenges your employees are facing in their day-to-day lives.
According to many global survey reports, employees in several organizations face the issue of financial stress due to a lack of proper financial management and financial literacy.
The majority of employees in various organizations use their corpus saved for retirement for meeting other daily expenses of life. Even many employees postpone health care issues for financial reasons and many contribute only a meager amount from their income towards retirement funds. These reasons of financial stress can affect the productivity of your employees and even your organization.
When your employees are under financial stress, this will affect the productivity in your organization. Financial stress in employees leads to increased absenteeism within the organization. When your employees are under stress for their finances, they are likely to miss coming to work very often.
So, when your employees are not at their workplace it means you are behind in catching up with the production goals and there is increased stress at the workplace due to ‘filling in’ for absentees. Even when your stressed employees are present in the office physically they are not present mentally and are not working at their complete capacity. This will hamper the productivity and the business of your organization.
With these adverse effects of employee’s financial stress, you need to emphasize your employee’s financial wellness and bring awareness among them for this.
Are you financially stressed? Take the employee financial wellness survey to find out.
Three elements of financial wellness
The major three elements associated with financial wellness can be listed as below.
1) Financial health
Financial health refers to a term that can be used to describe an individual’s financial situation. It means a way or a method to measure the financial aspect of an individual. The financial health of your employees involves several dimensions along with them such as savings of your employees, what are the fixed expenses and how much your employee tends to save in a month.
Self Assessment of Financial Wellness
As a part of exposure to financial wellness for your employees, you can suggest them to assess their financial health. They can perform a self-assessment of their financial health by asking some of the below-mentioned questions themselves.
a) Do they have an emergency fund to meet the unprecedented circumstances and events?
b) Are they saving properly for their retirement? Will those savings be adequate to achieve their long-term goals?
c) Do they have adequate insurance cover i.e. either health insurance or life insurance?
d) Is their net worth positive or negative?
e) Do they have all the necessities and how about the luxurious things which they want?
Your employees can have strong financial health if they have a steady and constant flow of income with very few changes in expenditure formats, investments with strong returns made and growing cash balance. Moreover, you can even suggest some tips about improving their financial health by proper budgeting, building a contingency fund that can be used in case of emergencies and paying off the debts they have as soon as possible.
2) Financial well-being
The financial well being of an employee is his attitude about his financial situation. It is about the successful management of their finances to achieve their short term and long-term financial goals. Financial well being means to be in a state where your employees have control over their finances, can face a financial shock along with the freedom about making financial decisions. If your employees are focusing on their financial well being, they are paving a path for their financial security.
Some simple ideas which can help your employees in maintaining their financial well being are listed below:
a) Track Income, Expenses and Savings:
You should suggest your employees keep a note of their income, the expenses incurred and the savings did. This method is quite helpful in keeping track of finances and will also act as a confidence booster for your employees in case of taking major financial decisions.
b) Do not compare:
You can advise your employees not to compare their income or expense and lifestyle with other people. Usually, this comparison happens with peers or friends but this comparison can affect their satisfaction level. It is quite natural that different human beings have different needs and different priorities in life and hence the expenses or savings would be different as well.
c) Positive Outlook:
Your employees should try and have a positive outlook towards life. This will help them in achieving success in all aspects of life may it be financial wellbeing or any other accomplishment.
3) Financial literacy
Financial literacy is the method by which you can impart financial education to your employees by which they would be able to manage their finances successfully. By imparting this basic financial education to your employees, you will help in inculcating the skills in them which will help them in managing their finances effectively. Financial literacy will help your employees in achieving financial stability, lowering their financial stress and improving their financial health.
By offering financial education at the workplace, you are improving the skills and knowledge of your employees about finances. This will help in boosting your employee’s confidence related to money matters, debt management, prepare and plan for retirement, etc.
Since your employees will be in less financial stress; this will reduce the absenteeism in the organization and also reduce the health care expenses in the organization. Moreover, this will also help in more employee retention and increased production in the organization.
You can initiate the process of financial seminars and workshops monthly for your employees. You can invite good finance professionals and speakers for the seminars who can impart basic financial knowledge and education to your employees.
Why is employee financial wellness important?
Financial wellness programs are an initiative taken by you for educating your employees about handling their finances wisely and improving their financial health. A financial wellness program helps in promoting the understanding of your employees about concepts related to finance management. This will be helpful for your employees in establishing stable financial scenarios at both the home and workplace.
Financial wellness programs for your employees can offer them the training and support that is necessary to manage the daily financial concerns. A well designed financial wellness program will help in the accurate understanding and application of money by your employees to develop stable financial health for now and even for the future. Financial planning can be briefly described as an additional benefit to the standard benefits of your employees which extends beyond retirement plans and the information about investments.
Read the blog on how to plan your finances in 2020
In earlier times, financial education programs for employees used to comprise of basic information on investments and retirement planning. But, with changing times the requirements of employees have changed and hence the financial wellness programs also need a change. You can organize workshops, lunch and learn programs, online training programs, counselling programs, online sessions with financial advisers etc. for educating your employees about financial wellness. You should ensure that your employees get a clear understanding of the benefits that are available for them and choose the ones which are best for them from a financial standpoint. The basic concepts which should be included in a well-designed financial wellness program are mentioned below.
1) Financial literacy
As said earlier, financial literacy is the basic financial education programs that give knowledge about the art of budgeting, saving, debt reduction, etc. It is about understanding the basic concepts related to finances and financial management.
Financial literacy is essential and important as it would teach your employees about how to handle their finances efficiently to achieve their goals rapidly. You can provide access to your employees to various financial literacy applications which will help them in handling their finances in a better manner.
2) Budget preparation
Most of your employees must be facing challenges like debts, monthly bill payments, unexpected expenses, etc. Budget preparation or budgeting would be of great help to your employees in handling these daily financial challenges easily.
You can include budgeting in your financial wellness programs for your employees to make them understand about balancing income and expenditure.
When your financial wellness programs for your employees include basics on savings and its importance, it is going to be of great help for your employees. They would understand the importance of savings, retirement planning and hence put a step forward towards achieving stable financial health.
You might want to read: How to save money for your employees
Today, the financial wellness programs for your employees should cover the different aspects related to financial health such as:
i) Setting up of financial goals
ii) Budgeting for household and personal expenses
iii) Emergency fund and short-term savings
iv) Credit building by consumers
v) Debt reduction
vi) Management techniques for the financial crisis
vii) Spending pattern and behavior
viii) Smart shopping tactics
ix) Student loan repayment assistance
You must offer financial wellness programs for your employees at the workplace because employees who have a higher level of financial stress would be less focused on their work and this would affect the productivity and business of your organization. Many employees when they are not able to handle finances efficiently tend to skip jobs and look around for new opportunities.
Moreover, when your employees are worried about their finances and their management they would utilize their time and potential in sorting out these issues rather than using them for achieving organizational goals. With the provision for financial wellness education at the workplace, your employees get exposed to various financial tools and resources which can help them in managing their finances better. So, they would be more focused at the workplace and this would increase the productivity of your organization.