Currently, financial stress has become one of the most sought-after topics, especially since the pandemic. The rising healthcare costs, skyrocketing student loans, job uncertainties, and the economic downfall have all led to financial crises, causing stress and affecting wellbeing.
With employees faltering under financial stress, their workplace engagement and productivity have also plummeted, impacting business growth. According to a Salary Finance study, employees who were stressed about their finances cost almost $2800 annually per worker of lost productivity to US businesses. And so, employers must take adequate measures to help them get through it.
Financial Stress Study and Outcomes
According to a 2021 study by FINRA Investor Education Foundation and Global Financial Literacy Excellence Center, employers must understand that the exact cause of employee financial stress is not the recent COVID-19 pandemic or their debts. The study reveals that the real root cause of the financial crisis is the low financial literacy levels. Poor knowledge about financial matters can reflect poor financial decision-making skills and behaviors, often leading to an unprecedented crisis.
The study showed that although the financial stress levels have worsened now, the problem was only aggravated by the pandemic, but not created by it. While trying to understand the actual cause of employee financial stress, the researchers of this study found multiple underlying issues like family circumstances, lack of job or income, and other social pressures impacting employee financial wellbeing. However, financial literacy is the main reason for most issues.
Researchers asked the respondents the Big 3 financial literacy questions to assess their basic understanding of – interest rates, inflation, and risk diversification. Based on their knowledge of these 3 topics, they were classified as “financially literate” or “not financially literate” category.
According to the study-
- Almost 38% of the financially literate respondents felt anxious while talking about their financial situation, compared to 55% of those who were not financially literate.
- Similarly, 51% of the financially literate subgroup reported feeling stressed while thinking about their personal finances, compared to 63% of those who were not deemed financially literate.
The study also revealed that higher financial stress led to poor financial decision-making, which has been directly linked with inadequate financial literacy.
Individuals who were financially stressed were more likely to overdraw their checking account, withdraw money from their retirement funds, have higher credit card debts, consumer loans, make late payments, or take high-interest loans. Such people were less likely to invest money for savings, have emergency funds, retirement funds, or own any fixed property.
The study also showed that financial anxiety could occur to employees with any income level, proving that it is not just because of a lack of assets. Almost 60% of respondents who had an income higher than the median income of $50–99K reported financial anxiety while thinking about their finances.
How Financial Wellbeing Programs can Help?
A 2020 study by John Hancock revealed that almost 86% of employees who were financially stressed were looking up to their employers for guidance through financial wellness programs.
Employer-sponsored financial wellness programs can help the workforce overcome their financial stress in many ways.
- By Educating about Finances – Every well-designed financial wellness program educates employees about specific financial matters. The tools and calculators help employees understand where they are going wrong with the budgeting, and the educational resources can help them understand the right financial behaviors. A Financial Wellness study by Enrich reported that after participating in financial wellness programs, 28% more employees were paying off their credit card bills within their monthly deadline and 15% more were contributing regularly towards their retirement plan.
- Emergency Fund Savings – Many studies show that making small savings can help in reducing finance-related stress. Financial wellbeing programs can guide employees in saving their money and making the right investments. Consultations with experts and educational resources can provide information about automation, inflation, and other finance-based topics. The Enrich study showed that after using financial wellbeing programs, almost 27% more employees started contributing to their emergency savings.
When the right financial wellness programs are implemented with the right modules and resources, they reduce employee financial stress. This was proven by a 2019 Enrich study in which there was a 23% average reduction of financial stress for employees who participated in financial wellbeing programs over a period of 12 months.
Although having adequate amounts of money is the key to alleviating financial stress, it is more important to know the art of managing all the money you have. Making the right investments and savings to ensure an active emergency and retirement fund is vital to ensure a life with financial stress. And a life without financial stress is one of the keys to leading a life of holistic health. Lacking money management skills not only led people to make wrong decisions about their money, but also deprived them of a safe financial future.
In short, offering employer-sponsored financial wellness programs is a win-win for the workforce and the management. While the reduced employee stress can improve their productivity, absenteeism, and engagement, it reduces healthcare costs and turnover. On the other hand, employees benefit from the programs by leading a stress-free life, better quality of life, and higher satisfaction at work and personal lives.
No wonder, employers are thriving to offer well-designed employee wellness programs that focus on different holistic health dimensions.