Financial wellbeing – time for businesses to act?

Financial wellbeing
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Paul Barrett
Head of Wellbeing
Bank Workers Charity
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As we move further into 2017 and still counting the cost of our Xmas extravagances, many of us will be watching the pennies. January is traditionally a difficult time for families in the UK. Getting through the month is estimated to be a struggle for one in four adults and it’s a time of year when the Money Advice Service usually experience a surge in usage. In January 2015 they dealt with almost 60,000 money and debt enquiries.

With careful management of resources, people can get their finances back into kilter within a few months but this isn’t always easy and many families struggle.

This shouldn’t be surprising. Following years of slow wage growth against a backdrop of the soaring cost of many of life’s essentials, personal finances in the UK are in a dire state.

Four in 10 UK adults have no more than £500 in savings, whilst the Office for National Statistics suggests that 16.5 million people have nothing at all in their bank accounts. The economy overall may have turned a corner, but the benefits have not yet filtered through to ordinary people.

Fifteen million people regularly fall behind on bills and use credit to plug the gap.

This frequently leads to a spiral of decline in personal finances, with three million now using credit to pay off existing credit commitments. This hand-to-mouth existence is a constant source of anxiety. In such finely balanced financial circumstances, an adverse turn of events can tip families into crisis.

And whilst the consequences for individuals and their families can be tragic, they are not without cost to employers. The last 5 years has seen an explosion of research into the impact of poor financial wellbeing on people and on businesses. They are serious for both.

The links between poor financial wellbeing and mental health problems are well documented, Citizens Advice found that 74% of people with debt worries found it was impacting on their mental health and more than half had experienced panic attacks.

There does appear to be a desire for more educational programmes in the workplace.

Money problems are also associated with increased physical health risks and they also impact on social wellbeing, denying people the opportunity to participate in much needed social interactions.  Meanwhile, CAB found that 79% of those with debt worries were losing sleep most nights, with all of  the physical and psychological consequences this entails.

"Knock-on effect"

With so many people worried about the precarious state of their finances one would expect there to be a knock-on effect in the workplace and of course there is.

Barclays research among 2000 UK employees found that poor financial wellbeing reduced business productivity by 4 %. At a national level, financial stress among employees costs organisations £120 billion in lost productivity and sickness absence.

Moreover, 15% of employees that are struggling financially, take time off work. In fact 17.5 million working days are lost through money concerns. It is much harder to access reliable data on presenteeism associated with poor financial wellbeing but it’s reasonable to assume this too would be a drain on productivity.

So should businesses be doing more to address the problem?

Some already are. Around 32% of UK employers have financial wellbeing programmes in place.

However the reality is that most businesses still focus primarily on their benefits packages and financial education tends to be restricted to an explanation of pensions and how they work. Yet financial education goes to the heart of the problem and is the area where business could make the biggest difference. Financial literacy among UK adults is very low.

Fifteen million people regularly fall behind on bills and use credit to plug the gap.

A Nationwide survey found that whilst 79% of people knew what LOL (laugh out loud) means, only 50% knew what PAYE stands for.

It’s absence is the reason so many struggle with financial decisions The rise in uptake of payday loans, the credit of last resort, means that many of the people who can least afford to do so, become further indebted and end up paying more than ever.

Not surprising when only 3% of respondents in one study were able to correctly estimate the cost of a payday loan.

A multi-track approach to financial wellbeing

A truly effective organisational means of addressing financial wellbeing would be to take a multi-track approach and this is what some UK businesses have done. Anglian Water have been leaders in this area for many years and include a mix of preventative and reactive elements.

They have offered employees financial master classes covering a wide range of topics, as well as offering advice on mortgages and saving, with the aim of building financial awareness and resilience. But recognising that employees will sometimes hit the buffers financially they also have resources available to help them get back on track.

They offer hardship loans and a well subscribed loyalty savings scheme and this is underpinned by a debt management programme.

Do employees want to talk about money?

Despite a widespread assumption that employees don’t want to talk about their money, there does appear to be a desire for more educational programmes in the workplace.

US research found that the preferred approaches to delivering financial education were live, in-person seminars, one-to-one coaching, webinars and self study/video tutorials.

A truly effective organisational means of addressing financial wellbeing would be to take a multi-track approach.

The same study found that after attending a one-to-one session, 80% of employees took steps to improve their financial position, showing that these kinds of interventions can have real impact.

A measure of the appetite for such  interventions can be seen in a US study where 87% of employees indicated that they want employers to help with financial literacy. Similar results have emerged in survey after survey.

The need for higher levels of financial literacy is only going to become more pressing in the years ahead. All the economic indicators point to little improvement anytime soon, with predictions of slow wage growth for the foreseeable future and every likelihood of a significant rise in inflation.

This is likely to place a greater strain on employees’ financial management skills and their ability to make wise choices. So now would be the perfect time for employers to do more.

As we have seen building employees money management skills can be a win-win for businesses. The time is right for UK businesses to make tackling the financial wellbeing of their workforce a key priority.

Read more about how and why businesses should play a role in improving financial literacy among their workforce in BWC’s whitepaper, Employee Financial Wellbeing: Time to do more. To download the white paper click here.

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27th Mar 2017 07:33

I should think that in order for a whole nation to start being more savvy with their finances, we're going to have to start introducing financial well-being classes to the schools and get them taught to the kids at an elementary level. We don't need everyone to be savvy to the point that they can trade stocks and shares, but just enough to make sure they don't spend themselves out of house and home!

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