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September 21, 2021

Financial Wellness 101: Everything You Need to Know

Financial Wellness 101: Everything You Need to Know

If you’re an employer, HR team member, or benefits professional, you’ve probably considered offering a financial wellness program. But maybe you haven’t made much headway because you don’t know where to start, or you’re unclear if employee financial wellness even falls under the purview of employers (spoiler alert: it does!). Here, we’ll outline what separates a check-the-box financial wellness benefit from one that will support employees in creating a better financial present and future. 

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Today, employees are more stressed about money than ever. The ongoing health crisis and resulting economic downturn have thrust money woes to the top of mind for most. Despite more than a year of seeing the implications of a lack of financial preparedness all around us, the majority of people remain unprepared. 

PwC’s 2021 Financial Wellness Survey found that: 

  • Less than half (47%) say they would be able to meet basic expenses if they were out of work for an extended period
  • Nearly half (49%) believe they’ll need to use money in their retirement plans before retirement
  • Employees are carrying credit card balances longer and owe more on their cards than last year. The fallout from the pandemic has exacerbated these habits

What is financial wellness? And why is it important? 

Financial wellness is a term used to describe your ability to manage your current and future financial needs. It takes into account the total picture of your financial health and recognizes how finances can impact stress levels. Much like physical fitness and mental health, financial wellness is essential because it impacts overall health and wellbeing. 

Some key identifiers of financial wellness are: 

  • Managing money well enough to meet everyday expenses
  • Spending within one’s means
  • Having enough of a buffer to financial emergencies or unexpected events
  • Staying on track to meet savings and retirement goals
  • Have a handle on debt and a plan to become debt-free

Why is employee financial wellness important?

The employer’s relationship with their workforce’s financial wellness is an intimate one. Employers are most directly responsible for an employee’s financial wellbeing, as the rates of compensation and the benefits the company provides constitute a significant portion of an individual’s ability to be financially healthy. 

What’s more, employers are directly impacted by an employee’s financial wellness, as financially stressed employees are more likely to be distracted at work, have lower productivity, and have higher rates of absenteeism. 

According to PwC’s 2020 Employee Financial Wellness Survey:

  • Financially stressed employees are 2.2x more likely to leave your company
  • 60% of employees say finances are their #1 source of stress
  • Employers lose an average of $1,900 per employee per year in lost productivity due to financial stress

Why are workplace financial wellness programs hot? 

Economic hardship and financial stress have swelled since the beginning of the pandemic. With months of a stalled economy and sluggish recovery, financial uncertainty remains high—even among those who have maintained employment through the health crisis. 

And as it turns out, financially-stressed employees don’t make for the most productive—or loyal—workers. Employees who are stressed financially because of the pandemic are 4x more likely to be distracted at work. They’re also more likely to seek new employment opportunities at companies that care more about their financial well-being. Even so, one-fifth of employees will wait for a financially crippling event to seek guidance, which means employers need a way to continually engage employees on their road to financial wellness to be competitive. 

While employees place equal importance on physical, mental, and financial health, they feel least in control of financial health, according to a study by The Harris Poll on behalf of Franklin Templeton, a global investment firm.

The same study found that 75% of workers want their workplace to provide more tools to manage their financial wellbeing, and 9 in 10 employees want tools to visualize their future and optimize financial wellbeing. 

Employee financial wellness programs are gaining in popularity today as a tool to attract and retain employees in a tough labor market. Despite the still-recovering economy, employees are leaving their jobs in droves; Four million Americans voluntarily quit in April 2021, an all-time high. Amid this “great resignation,” employers are turning to financial wellness programs to attract and engage top-performing employees.

What are the benefits of employer-based financial wellness programs? 

For employees

Financial wellness programs help employees get more out of their paychecks. Employees benefit from resources to manage their day-to-day spending and expenses, track and measure progress toward saving and retirement goals, and reduce debt.

The best options even offer access to one-on-one financial planning with Certified Financial Planners™.

But the perks of financial wellness programs don’t stop at monetary benefits. Individuals with better control of their finances report less stress and improved mental health—plusses for employers, too. 

For employers

We know that money is the number one source of stress for employees—above that of work or relationship-related stress combined. And stressed-out employees cost companies big time.

Some estimates put financial stress at an estimated $250 billion per year in lost productivity and absenteeism. 

Employers that provide a financial wellness benefit to help employees improve financial health benefit from happier, healthier, more focused, and productive workers. 

Financial wellness programs can increase loyalty and retention, too. A 2020 survey by SoFi found that 48% of employees would be more committed to staying with their employer for a longer period of time if they offered financial wellness benefits, and 30% of respondents think they’d be more productive at work. 

How effective are financial wellness programs? 

Much like physical fitness or wellness programs, the efficacy of financial wellness programs varies greatly. Creating lasting behavior change is hard, and the best wellness programs are designed to keep individuals on track even when they lack motivation.

Many company-sponsored financial wellness programs focus on building financial literacy. These programs often center on day-to-day financial management and cover topics like budgeting and expenses. While these are undoubtedly helpful tools, they’re akin to a physical wellness program that preaches the values of eating healthfully and exercising regularly. 

Providing the information is certainly important, but the effectiveness of wellness programs—physical or financial—hinges more on the delivery than the content. Self-guided programs are boring, plain, and simple. While employees may start strong, logging expenses or checking their progress on yearly savings goals, many lose motivation after only a few short months. 

Rather than educational resources, employees need holistic financial programs that cover the nitty-gritty of employee finances (expense management, savings goals, debt reduction) while offering expert guidance.

This last point is key: a joint Bank of America and Merrill Lynch survey found that 41% of employees say advice from a professional, such as a financial advisor, planner, or accountant, would be the most important financial resources their employer could provide. 

For financial wellness programs to be effective, they must be comprehensive, accessible, easy-to-use, and offer expert guidance. 

What types of financial wellness programs exist? 

The financial wellness programs offered are as diverse as the companies that provide them. The most common are financial literacy programs that focus on retirement programs and 401(k) plans. Let’s look a little closer at the various options available.

1. Financial literacy programs 

From 2019 to 2020, the percentage of companies offering financial programs to improve overall financial understanding and knowledge has increased from 12 to 66%. These programs have traditionally centered on how to best maximize and prepare for retirement through savings and investments. While this is a necessary aspect of an individual’s financial health, holistic wellness is about so much more than a comfortable nest egg for retirement. According to PwC, “very few employees of any age define financial wellness in terms of retirement, which has historically been the focus of employer financial programs.” 

2. Financial wellness platforms

Holistic financial wellness platforms, like Origin, allow users to manage their compensation, benefit, and personal finances in one place—side-by-side with Certified Financial Planners™. Employees can work with financial planning advisors bound by fiduciary duty to develop a financial roadmap and track their progress. Platforms like Origin function as a single place for employees to understand the value of their cash, equity, and benefits to see progress and take action. 

3. Budgeting and cash flow management

Tailored advice from a personal financial advisor who is also a fiduciary, an individual with a legal and ethical obligation to act in the best interests of others, is best. To compliment this advice, use an all-in-one dashboard where you can see how your money is spent and where you’re at risk of going over budget. These tools typically allow users to filter and display information in several ways, like timelines of spending and budget breakdown along with spending categories, which can cut down on financial literacy barriers that may exist for some demographics. 

4. Tax guidance and preparation

Some financial wellness programs, like Origin, offer tax guidance and filing services. They can provide guidance and filing services and assist in complex situations that arise when it comes time for an individual's income tax return, such as employee stock option exercises and share sales. Complete tax preparation and filing gives employees peace of mind to handle everything from liquidity events to itemized deductions, and make complex tax situations—like tax withholding adjustments and taxes owed in multi-state filings—easy.

How to start and select a financial wellness program

The best financial wellness benefit is one that your employees will actually use. To find out what employees would find most helpful, start your search for a workplace financial wellness program by asking employees what they’d like to see offered. Use employee surveys to learn about the features they’d like to see included in an employer-provided financial wellness program and their willingness to engage the services of a certified financial planner. Ask what they like about the company’s current offerings and where they could improve.

Once you have a shortlist of the features that would best suit your employee’s needs, begin searching for a financial wellness program that would be a good fit. 

During your research and review of top programs, ask questions like:

  • What does the launch look like?
  • What’s your average employee engagement rate? 
  • Can employees continue to access education and support post-launch? 
  • What is your approach to customer success, and how do you measure it? 
  • How do you manage employee requests?

Once you’ve settled on a program, spread the word among employees. Employees will only benefit from a financial wellness benefit if they are aware of it and know how to use it, so take a multi-channel approach to inform employees of the new offering. 

Email and Slack messages are great, but nudge managers to mention it in department meetings and one-on-ones, too. 

For employees working on job sites or in manufacturing plants, consider using physical posters and brochures to share this new offering. 

Lastly, be light and approachable in communicating this new offering. Benefits-related communications often go unread or unnoticed because they’re dense and lengthy. Keep things simple and highlight the perks of the new employer-sponsored financial benefit while inviting employees to learn more. 

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