Let’s start from the beginning. What really is financial wellness?

Financial wellness (or financial well-being) encompasses numerous emotional, psychological, and survival drivers that coalesce to determine an individual’s interaction with money. In other words, rationality, realistic goals, and decisions that ensure monetary sustainability are all markers of a person’s healthy relationship with wealth (or lack thereof).

Financial wellness aligns with stress release and the freedom to move in different directions. On the other side of the coin, unhealthy financial management reflects the opposite of these stated attributes.

What does financial wellness have to do with me as an employer?

Let’s face it, employees who are financially unwell are working at a disadvantage. Financial stress is a horrific inhibitor, leading to errors on the job, absenteeism, drug and alcohol abuse, disruptive teamwork, and erratic behavior.

Not just that, but increased employee churn—a massive blow to any business’s bottom line—results from financial worries getting a grip on employee motivations. In fact, according to a Price Waterhouse survey conducted in late 2020, nearly four in every ten workers reported that if push came to shove, they’d be left floundering with less than $1000 in a rainy day savings account.

Of the respondents who said they were experiencing stress, 76% attributed it to financial inadequacy.

Even so, this doesn’t mean the other 62% have solid financial health foundations. It simply means they don’t feel they’re standing on the precipice of bankruptcy.

Okay, I get it. But what can I do about it?

A great deal, as it happens. Let’s start at the following default position, which is where many CEOs begin and end their efforts:

“We pay a competitive salary, so if that’s not enough, let the chips fall as they may.”

Such an approach is out of step with the demands of modern society. Unfortunately, it’s not the salary level that’s to blame for financial dysfunction (unless the pay is below par); it’s how employees deploy their income (after tax) that matters most of the time.

Indeed, competitive remuneration is a requirement for the recommendations below to gain traction. No amount of financial wellness strategizing will help if your pay scales are below average. However, once you have that in place, instituting an employee financial wellness program can truly make a world of a difference.

SISX is the open sesame to improved employee financial wellness

What is SISX?

A Franklin Templeton Investments survey discovered that employees equally weigh mental, physical, and financial well-being (hereon referred to as “MPF“). Notably, “F,” is often the most out of control. Thus, companies can step into the breach and help their workers achieve good MPF balance, simultaneously gaining a competitive advantage. When staff recruitment and retention advantages work in unison within an organization, the sky’s the limit. So, in my view, the way for an employer to approach the financial wellness of its employees is to observe, evaluate, and assist in the latter’s Spending, Saving & Investment Experiences (i.e., SISX).

SISX is a powerful summary of the drivers behind the numerous challenges facing the younger generations—Millennials, Zoomers, and Gen Xers. In fact, here are a few of the many disruptors regularly dropping into employees’ lives:

• Paying back student loans (SLs).
• Renting a home or buying one.
  • If buying, then raising a mortgage, fixed interest, or variable, fifteen years or thirty, and finding the equity.
  • If renting, then finding affordable accommodations that meet family needs and desires.
• Cost of living (COL) planning and how to live within one’s means. This involves incorporating credit card use (or abuse) into that formula, and/or Buy Now, Pay Later facilities.
• 401K saving and life insurance.

If SISX is successful, the company will inherit the opposite of the ills described above with notable improvement in the following drivers of employee performance:

1. Loyalty
2. Team contribution
3. Reliability
4. Retention
5. Expertise and productivity

When all of these are in play, the organizational impact can independently transform into a significant employee MPF booster. How? Revenues increase, thus creating the ability to pay higher bonuses—undoubtedly a massive catalyst in fortifying employee financial happiness.

Restructuring HR to be SISX-centric

The key to the kingdom rests with restructuring the HR department to focus on what matters if you want MPF-balanced employees. In other words; fast, encouraging results depend on deploying practical tools with the right attitude. Here they are in no particular order:

#1. Provide the opportunity to enter a retirement plan

If your business can afford to match employee contributions, that’s the first prize. However, just establishing a retirement platform and explaining its benefits to employees is a huge move forward. Once your staff members appreciate that automatic payroll deductions build a nest egg, accumulating to a significant tax-effective value down the road, they generally opt in.

#2. Healthcare plans

COVID-19 taught us that personal and family healthcare is a vital consideration, hammering home the following lessons:

• Shifting healthcare to the sidelines because “we’re still young” is no longer on the table. The pandemic hit all ages, also exacerbating other kids’ diseases (e.g., RSV) that now pose a larger threat.
• Working remotely puts employees at greater risk of contracting viruses brought home from school.
• Nothing destroys financial stability more than severe and unexpected health disruptions requiring hospitalization, surgery, and prolonged prescription or/and physiotherapy. Medical administrations are relentless in their pursuit of unpaid bills, snowballing employee stress to unmanageable levels.

In short, unattended health symptoms anywhere in the family unit can quickly spiral out of control, materially disrupting your employees’ work focus – ushering in all the nasty side-effects described above. So, providing a cost-effective healthcare plan that carries tax discounts for matching employer contributions is crucial, allowing employees to feel they have a secure landing pad if ill health rears its ugly head.

#3 Student loan repayment plans

Close to 40% of millennials struggle to meet their student loan obligations, thus tossing the best-laid financial plans into the wind. So, some innovative companies have tied their incentive programs to subsidizing student loans. For example, instead of structuring extraordinary commissions or share of profit to 100% cash disbursement, link part of it to drawing down student loan obligations. Why is this effective? First, it connects to a critical financial wellness component that may go unattended if bonuses are all cash. Second, it creates a conscious responsibility level, which, if explained well, should resonate with the employee.

Of course, all of this depends on a corporate culture that believes in sharing extraordinary profit and performance beyond what is usually expected. Therefore, employees who buy into the program appreciate that there’s no free lunch; that ultimate financial wellness rides on them going the extra mile. It’s the only route to a win-win outcome.

#4. Employee assistance programs (EAP)

Unfortunately, high schools seldom offer courses on personal financial management.

People emerge from these educational centers with no idea of the difference between cash flow and profit, or the double-edged sword of borrowing money to make money.

Therefore, installing a specialist advisor in the company for employees to speak to confidentially about financial issues is a fantastic benefit. Explaining sticky situations and financial squeezes to a seasoned guidance officer can relieve stress significantly. In addition to this, conduct voluntary podcasts and webinars to encourage employees to face their most pressing financial issues head-on. Create financial literacy to bridge the intellectual gaps people fall through in their efforts to create financial stability. This may present as group classes, to begin with, and later evolve into one-on-one consultations to explore various issues, for example:

• Investing in ETFs
• Life insurance—term or universal
• How to buy inflationary-hedge treasury bonds
• Average cost investing—the safest way to go
• Why an S&P 500 Index fund is the GOAT when it comes to investment options
• How to mortgage a home without worry

The points above are the tip of an enormous financial education iceberg waiting to capture the attention of beginners. So why not spearhead a program like this in your business?

#5. Employee purchasing programs or discounts

Appoint a trusted executive to harness your relationships with suppliers, customers, business associates—everyone in the marketplace and industrial realm you conduct business with. By “harness,” we mean establishing discount codes your employees can apply when buying merchandise from these entities (for significant discounts or easier than standard terms, of course). This may range from buying electronics to subscribing to an app, joining a gym, buying golf clubs, etc. Employees will respect and be thankful for your efforts in such a program, which will show that you care about saving them money. Moreover, the vendors may welcome it, too, generating some business (albeit at lower margins).

Understanding your employees’ financial position

Clearly, there are many ways to create financial wellness for your staff that go above and beyond simply paying a competitive wage. And you can do it by investing little money, and instead favoring commitment, time, and forethought. Indeed, it demonstrates how helping your employees uplift themselves also elevates the company to new heights.

In short, productivity benefits are cut two ways when you care about workers’ financial stability. You’ll see teams collaborating seamlessly, kicking churn to the curb and improving staff retention. To get started, you need to first understand where your workers stand.

Take a quick survey to assess their needs and concerns. That way you can tailor your initiatives to their requirements and maximize impact. Not sure where to start? We’ve got a quick survey template to assess how happy your employees are with their benefits.

Need more insight? Let’s get in touch! We’d love to help you better understand engagement drivers and gaps so that you can transform your employee experience!