Most employers recognize the importance of taking care of the mental health of their workforce. But what’s equally important is to understand what causes these mental health problems in the first place. We’re seeing that financial wellness plays a significant role when it comes to overall well-being—especially during the pandemic. In this post, we’ll explore how HR teams can use this link to better support their employees.
The current state of financial wellness
Unfortunately, financial stress is ubiquitous in the United States. 90% of Americans say that money has an impact on their stress levels. What’s even worse is that people don’t have the financial knowledge to effectively address these issues.
Only one-third of adults can answer at least four of five financial literacy questions on fundamental concepts such as mortgages, interest rates, inflation, and risk. This, combined with the fact that 65% of people feel like their financial difficulties are piling up so much they can’t overcome them, creates an extremely challenging situation for employees.
In fact, when asked what they feel causes them the most stress, employees cite financial matters more than any other life stressors combined. It’s no wonder why financial stress costs employers an estimated $250 billion per year in lost productivity and absenteeism.
The pandemic has only exacerbated this existing problem. More than one-third of full-time employed Millennials, Gen Xers, and Baby Boomers have less than $1,000 saved to deal with unexpected expenses—the effects of COVID-19 have made an already fragile financial state unmanageable for these individuals.
Understanding the link between financial wellness and mental health
This level of financial stress can impact various aspects of your employees’ lives. 40% of people say managing their money on a daily basis limits the extent to which they can enjoy their day-to-day life. Being stressed about money also has a direct impact on health and can negatively affect everything from sleep quality to respiratory symptoms.
Research shows that financial stress manifests itself with regard to mental health as well:
- People in debt have higher rates of mental health issues like depression and anxiety compared to those who are debt-free.
- Financial stress is the second most common cause of suicide, after depression.
- 86% of people with mental health problems said that their financial situation had made their mental health problems worse.
Financial stress also leads to a decline in decision-making abilities. In other words, the more stressed your employees are, the less likely they are to make smart decisions when it comes to spending and saving. This creates a vicious cycle that’s difficult to escape.
On the other hand, when people feel good about their financial health, they feel positive about their overall health as well. When it comes to determining perceptions about financial health, there are two influencing factors: how stressed out someone is about their money situation, and how secure they feel about their finances.
Unlocking financial wellness to improve mental health
By addressing these two factors, you can improve both the financial wellness and overall mental health of your workforce. But how exactly can you help people feel less stressed and more secure about their financial situations?
The truth is that there’s no “right” answer to this question. Every employee is dealing with a unique set of financial problems, so the best thing you can do is consult your benefits broker and design a package that will deliver the maximum impact. Generally, there are three areas we recommend focusing on:
Reducing the financial burden on employees.
While employees should prepare for long-term financial goals, it’s also important to recognize that many of them are drowning in debt. Until those short-term needs are addressed, it’s difficult for workers to even entertain the idea of saving for the future.
That’s why you want to look for ways to reduce significant areas of financial burden on your employees, whether it’s through debt repayment, loan assistance, or even reimbursement programs for significant expenses.
Providing personalized financial guidance.
More than 20% of survey respondents told the National Financial Educators Council that they don’t have anyone trusted to turn to for financial guidance. Employers have a unique opportunity to fill this gap for employees by connecting them to the right tools, resources, and experts.
At Origin, we try to connect the dots by offering a comprehensive financial wellness platform that helps employees map out their goals, while also receiving personalized support from a financial planning professional.
Helping employees plan ahead.
Many people seek financial guidance at key decision points or when they’re already in the middle of a crisis. To avoid this reactive mindset, HR teams should encourage employees to think several steps ahead.
One of the best ways to do this is to improve the financial literacy of your workforce. The more knowledge employees have, the better financial decisions they’ll make. When thoughtfully approached, workshops, Q&A sessions, and materials that are informed by Certified Public Accountants (CPAs) or Certified Financial Planners (CFPs) can be incredibly valuable.
There’s no doubt that the relationship between financial wellness and mental health is a powerful one. With the right approach, you can simultaneously reduce the financial stress your employees are experiencing and improve their overall well-being—including their mental health. If you’re interested in learning how Origin’s comprehensive financial wellness platform can benefit your workforce, request a demo.