The centrality of Financial Wellness for employees | The Financial Technologist

It is no secret that the COVID-19 pandemic dramatically altered the way we live and work. That is obvious even if you are not spending hours on Zoom from your home office, intermittently being interrupted by kids and/or pets. We are now living through a high cost of living crisis. What is less obvious is the impact on people’s finances and financial well-being. We know that many people, especially women, either lost their jobs or resigned to care for family members, but we don’t see the impact on their bank accounts. We see those who remained employed during the pandemic, but it’s not obvious that their financial stress is on the rise; with 63% of employees surveyed by PwC saying their “financial stress has increased since the start of the pandemic”. We may know individuals who took part in the “Great Resignation” in the hopes of finding more fulfilling work or recovering a work-life balance that was lost, but we don’t see their worries about retirement plans that are now off track. Given the current situation, it's no longer possible to ignore the impact financial strain has on an individual’s overall wellness. This has implications for how businesses approach the well-being of their employees. The Harvard Business Review predicts “wellness” will replace employee engagement as the new measure organisations will use to capture the “financial health, mental health, and physical health of their employees to more accurately predict employee performance and retention”. Neglecting the financial aspect of wellness when creating a social sustainability program for ESG can have a very detrimental effect on both employees' and the employers’ bottom line. This is starting to paint a very bleak picture, but there is a silver lining to the clouds. Morningstar's research completed a study that revealed the importance of financial empowerment to a person’s overall emotional well-being. The graph below depicts the findings and shows that people can feel empowered and have a positive emotional experience with money regardless of income level. Samantha Lamas writes “A sense of personal power—not money itself—may be the key to emotional wellbeing in our financial lives.” This is an exciting finding for companies large and small because it means that no matter an employee’s income range, companies can create programs that empower employees financially- and that can have a real impact on their emotional sense of wellbeing. The goal then, of an impactful ESG-Social program, is to help employees come to feel empowered in their financial lives. One definition of ‘empowerment’ in the Oxford English Dictionary starts as “the process of becoming stronger and more confident…”. How can a company’s financial wellness program help employees feel more confident? By arming them with knowledge, tools, and support. Programs should include an educational component to ensure employees are getting the right financial information; critical when so much misinformation is online. Presenting employees with useful tools will give them experience, and as they take action and use the tools, they will build confidence that they can affect real change in their financial situation. Support is the final, but not least, essential component. Not only can support encourage people to get started, but a supportive community is key to helping people sustain new behaviours needed to reach their goals. Here are some examples of what an empowering financial wellness program by PaceUP Invest will look like in practice: Knowledge • Hosted financial education seminars and workshops targeted at specific employee needs • Exclusive Access to reputable education resources (blogs, videos, etc.) online Tools • Online tools that track spending, saving, and progress toward retirement goals • Availability of a peer-comparison dashboard to help them see if they are on track Support • Incentives to employees for meeting with a company-sponsored financial advisor at PaceUP Invest • Membership in the PaceUP Invest community that supports positive financial decisions Value add to employers are: • Increase in productivity • Less turnover and more retention of staff • Attract top talent to the company • Tacking the S part of ESG. The SDG goals impacted are 1, 4, 5, and 10. Now is the time to help your employees be less financially stressed! You can read Rukayyat's article and further industry insights in the latest edition of The Financial Technologist. Download your free copy here.