By Sarah Bishop, Senior Retirement Plan Advisor
As a business leader, investing in the financial wellness of your workforce is a strategic decision that can directly influence productivity, employee turnover, healthcare costs, and the overall success of your business.
What is Financial Wellness?
Financial wellness is the overall health of one’s financial situation, including financial security, knowledge, and behaviors. It’s the peace of mind your employees experience when they are not worried about money.
Benefits of financial wellness include:
- Ability to meet current and future financial obligations
- Feeling financially secure
- Reduced stress / Improved mental health
- Having the freedom to make choices about spending on enjoyment
- Improved quality of life
How Financial Stress Impacts Employees
Financial stress can cause employees to become distracted, leading to decreased productivity, absenteeism, turnover, and higher healthcare costs.
- 57% of employees say finances are the top cause of stress in their lives[1].
- A 2023 survey cited negative impacts on sleep, mental health, self-esteem, physical health, and relationships at home resulting from financial stress[1].
According to EBRI’s 2023 Workplace Wellness Survey, the top causes of financial stress are:[2]
- Lacking emergency savings
- Paying monthly bills
- Saving enough for retirement
- Debt management
Emergency Savings:
Emergency expenses can occur for anyone, yet many people lack the financial buffer afforded by an emergency savings account earmarked for these specific needs.
- Only 41% of employees feel very prepared to handle an emergency expense of $500.
- Only 18% feel very prepared to handle an emergency expense of $5,000.
Emergency savings should be separate and distinct from long-term savings, but more than half of those surveyed believe their retirement accounts are their only significant source of emergency savings[2].
The Cost of Financially Stressed Employees
Financial stress can cause employees to become distracted leading to lower productivity, absenteeism, and higher turnover – all of which can create higher costs for employers.
Key areas affected by financial stress:
Distractions = Lower Productivity:
- More than half of American workers agree that worrying about finances distracts them at work[2].
- 1 in 3 full-time employees say money worries have negatively impacted their productivity at work[1].
- 56% of financially stressed employees who are distracted due to personal finances, spend three hours or more per week at work dealing with or thinking about their finances[1].
Absenteeism:
- Financial stress can make employees more likely to have an unplanned leave or miss more days of work.
- Presenteeism occurs when an employee shows up to work but is less engaged and productive, which can also be caused by financial stress.
Higher Turnover[1]:
- Financially stressed employees are:
- More likely to leave their current employer than those who are not financially stressed
- Twice as likely to be looking for a new job than non-financially stressed employees
- More likely to be attracted to another employer that cares more about their financial well-being compared to non-financially stressed employees
Increased Healthcare Costs[3]:
- Studies have found that financial stress:
- Is linked to a higher risk of heart disease and other chronic illness
- Can lead to higher use of prescription drugs for chronic illness
- Can contribute to poor quality of sleep or insomnia, which can further exacerbate health issues
- These conditions can all lead to increased healthcare costs for both the employee and employer.
Financial Wellness Programs Have Positive Impacts on Business
Employee financial wellness education typically includes information on budgeting, debt management, and savings strategies that can reduce some of the financial stress felt by employees. Employers that implement these programs can experience many benefits, including increased productivity and employee satisfaction, higher employee retention rates, and lower costs associated with absenteeism and healthcare.
78% of workers in a 2023 John Hancock Study believe it is important for employers to offer financial wellness resources. 82% say access to these resources helps reduce financial stress and 70% say access increases productivity. 77% also say they would be more likely to recommend an employer offering these benefits to others.[4]
Role of 401(k) Retirement Savings Programs in Financial Wellness Education
A 401(k) plan or other employer-sponsored retirement savings plan is often at the center of an employee’s financial wellness strategy. These plans help build retirement savings and foster trust and engagement with the company. Employees who believe their leaders care about their financial well-being are more likely to feel valued, increasing their motivation and loyalty.
EBRI’s 2023 Workplace Wellness Survey notes that 54% of employees say retirement savings plans are most important to their decision to stay in their current job or choose a new job. 56% say being offered a retirement savings plan through their current employer contributes a lot to their feeling of financial security[2].
Financial wellness education can be incorporated into an existing 401(k) employee education program. Delivery of the education by a trusted advisor or consultant who employees are already familiar with may lead to more engagement.
Offering a strong retirement plan with a dedicated service team available to help employees make the most of it, can help demonstrate an employer’s commitment to the long-term financial stability and overall well-being of its employees. A well-structured 401(k) plan can also serve as an attraction tool for top talent.
Implementing an Effective Financial Wellness Education Program
Employers seeking to implement or improve upon their financial wellness education program should consider the following:
- Understand the specific financial challenges facing their employees through surveys, conversations, or other means of feedback.
- Select appropriate partners to provide platforms and tools that facilitate easy access to education and resources as well as meetings and availability for follow-up conversations with a financial professional.
- Communicate regularly about the benefits and resources available through email campaigns, flyers, videos, and meetings.
- Evaluate the effectiveness of the program by monitoring engagement and action through analytics and surveys.
- Adapt the program if employees are not engaged. The program is only as effective as the positive behaviors it produces.
The support of leadership is key to the success of these initiatives. Leaders who not only promote, but actively participate in these programs, demonstrate the importance of financial wellness and encourage the positive financial behaviors they want to see among employees.
The success of a financial wellness education program reflects a company’s commitment to its most valuable asset—its people. Creating an environment where employees feel educated, supported, and financially secure, promotes the long-term success and stability of the company.
Visit the Finerty Retirement Plan Team’s Wisdom and Wealth webpage to see how Moneta can help with financial wellness and retirement plan education. https://team.monetagroup.com/401k-financial-wellness/
[1] https://www.pwc.com/us/en/services/consulting/business-transformation/library/employee-financial-wellness-survey.html
[2] https://www.ebri.org/health/Workplace-Wellness-Survey
[3] https://www.everydayhealth.com/wellness/united-states-of-stress/financial-stress-wellness-understanding-problem/
[4] https://retirement.johnhancock.com/us/en/financial-stress-survey#stress-and-the-economy
© 2024 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment adviser does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified.
Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
