Home Compliance The Next Workplace Wellness Epidemic: Financial Illiteracy?

The Next Workplace Wellness Epidemic: Financial Illiteracy?

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Corporations and leaders have long embraced workplace wellness and well-being programs focused on mental and physical health as well as stress management. But as entrepreneur Asim Hafeez explains, an overlooked aspect of well-being may be causing a productivity drain — and leaders should take note.

Workers’ financial wellness may be worse than most managers realize. According to a survey conducted by Thriving Wallet, 90% of respondents said they feel stressed about money, 65% reported feeling overwhelmed by their financial situation, and 40% said their financial worries impede them from living life to the fullest. Worse still, the survey reveals that 40% of respondents are not saving for the future.

Believe it or not, the physical well-being of your workforce is linked to their financial security. The human body is not designed to withstand chronic stress. Our adrenal glands release adrenaline to give us a burst of energy when confronted with a looming threat — which makes our hearts race and our blood pressure rise — while another hormone, cortisol, tamps down our immune, digestive and reproductive systems.

This response works beautifully in the face of danger, but when anxiety continues over a long period of time, our bodies suffer. According to the Mayo Clinic, long-term stress is associated with an increased risk of depression, insomnia, poor concentration, headaches, gastrointestinal distress, muscle discomfort, weight gain, hypertension, coronary artery disease and stroke.

In light of the fact that 90% of people feel stressed about money, it’s not a big leap to say that when your employees are under a long-term financial strain, it hurts your organization, as their financial stress keeps them up at night and diverts their attention at work. Conversely, when your employees’ financial worries decrease, efficiency, productivity and engagement in your workplace will increase.

What is an employer’s role in financial well-being?

Improving employees’ financial wellness goes beyond simply paying them well — though that’s certainly part of it. What they know about wise financial practices and how they treat money also help determine their financial health. If employees lack the foundation of smart financial decisions and habits, all the effort companies put into fair compensation is wasted. 

Basing fiscal decisions and actions on practical information — such as how much money is in their bank account at any time, how credit works, how to avoid falling into debt and how to save for emergencies and retirement — all improve their fiscal wellness. 

Traditionally, the average employer’s financial literacy training has revolved around retirement and 401(k) plans. But that assumes workers come in with a baseline understanding of financial literacy, which is increasingly not the case. 

Particularly for younger workers, such as those in Generation Z, more groundwork is needed. And employers must start laying those building blocks, particularly for Zoomers and young Millennials.

Providing workers with financial mentorship ranges from simple, such as conversations about financial goals, to more advanced, such as training workers on educational and financial apps that can help them with planning and daily money management. And remember that 20-something employees will have financial needs that are very different from Generation X or Baby Boomer workers who are putting children through college or approaching retirement.

Generational differences

Gen-Z workers not only need financial mentors — they clamor for them. In fact, a study from the Teachers Insurance and Annuity Association (TIAA) reveals that 65% of Gen Z workers believe their employers are responsible for coaching them in financial literacy. 

And other TIAA research shows that this generation of workers needs help the most, with the average Zoomer answering only 43% of personal finance questions correctly, the lowest of any generation. To be fair, nobody did exceptionally well in this research, another reason for employers to carry more weight when it comes to workers’ financial literacy.

Conducted along with the George Washington University business school and the Global Financial Literacy Excellence Center, the study covered eight areas of financial knowledge:

  • Earning: Determinants of wages and take-home pay
  • Consuming: Budgets and managing spending
  • Saving: Factors that maximize accumulations
  • Investing: Investment types, risk and return
  • Borrowing/managing debt: Relationship between loan features and repayments
  • Insuring: Types of coverage and how insurance works
  • Comprehending risk: Understanding uncertain financial outcomes
  • Go-to information sources: Recognizing appropriate sources and advice

Baby Boomers and those in the Silent Generation did the best in the study, with an average score of 55% vs. 49% for Gen-X and 48% for Millennials. 

Promote employee financial well-being

Offer your staff financial literacy training, guidance and other support to help them reach their financial goals. To get started, try incorporating discussions about money into your day-to-day office routine.

The next step is to familiarize your staff with a financial wellness checklist. Once they have assessed their financial position, you can help them create a strategy to move forward. Your plan can help them alleviate financial stress by outlining specific steps to create a budget, pay down debt and grow a cushion of savings.

This is, of course, on top of the tangible benefits you should be offering, including competitive wages, paid time off,  flexible insurance options and retirement account matches. 

A recent survey from PwC found that 63% of U.S. workers are becoming increasingly stressed by their financial situations. In fact, only 47% of these working-age adults have savings to meet basic living expenditures in the event of unemployment, and 49% say they may cash out their retirement early.

Showing your team that the company is invested in them in multiple ways can lead to better engagement and workplace loyalty, as well as encouraging their professional development, boosting their economic security and getting them ready for life after work.

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