Dealing with personal finances can be stressful, and that stress can have a negative impact on several aspects of a person’s life including personal relationships, physical health and performance on the job.
A 2015 survey by the American Psychological Association found money was the top source of stress for American adults. (1) Whether it is worrying about debt, paying bills or planning for retirement, financial concerns are at the forefront of our psyche.
Unfortunately, many of us lack the knowledge, skill set or inclination to tackle the many aspects of Financial Wellness.
From an employer’s perspective, helping employees alleviate some of that stress and work toward gaining Financial Wellness can lead to a more productive, more engaged and happier workforce.
A strong Financial Wellness program can help employees develop skills to manage money, effectively budget, set short- and long-term goals and plan for retirement.
According to a 2017 PricewaterhouseCoopers (PwC) survey, 53 percent of employees feel stressed when dealing with their personal financial situation and 46 percent say financial challenges cause the most stress in their lives. Twenty-two percent of those surveyed said financial worries have impacted their productivity at work, and 12 percent said they have occasionally missed work due to financial worries. (2)
Financial concerns can include worrying about retirement, maintaining a certain lifestyle, paying off debt, being able to cover monthly expenses and not having adequate emergency savings.
According to the PwC survey, these concerns don’t only apply to employees with lower incomes. Forty-four percent of workers making more than $75,000 per year listed not having enough emergency savings as their top financial concern. For workers making less than $75,000, 54 percent had the same concern. (3)
As an example, let’s take a look at the penchant for many workers to take out loans against their 401(k) plans to meet current financial needs. In a 2011 study, Aon Hewitt reported 28 percent of workers participating in a 401(k) plan through their employer had a loan outstanding. (4)
While usually a better option than withdrawing funds or cashing out the plan, taking a 401(k) loan can ultimately prove to be a retirement setback if the employee is younger than 59½ years old and can’t repay the loan for whatever reason. That money will then be treated as a taxable distribution with a penalty and won’t be available for retirement in the future.
Implementing a Financial Wellness program to address these types of topics and concerns can help combat your employees’ stress levels and help make them more confident in their financial decisions.
Implementing a Financial Wellness Program doesn’t necessarily mean implementing a complex and expensive plan. Oftentimes, simple suggestions on cash management, debt reduction and retirement planning can have a large positive impact for employees.
A successful Financial Wellness program not only focuses on the broader Financial Wellness topics, it also focuses on the simple but effective techniques that can make all the difference including training to help your employees build skills in budgeting, saving, debt reduction, retirement planning and helping them better prepare for unexpected financial emergencies.
This approach can be beneficial to all employees and can be particularly useful to employees in their 30s and 40s who have many years to go before retirement. Employees in their 50s and 60s who are closer to retirement can also benefit from these budgeting skills, and they will likely see value in retirement planning that can help them map out the next stage of their lives.
The goal is to help your employees feel confident they are making the right financial decisions for the short- and long-term. Implementing a Financial Wellness program as part of your firm’s existing employee benefits program can help your firm and employees plan for a prosperous future together.
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Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.