Financial education, a key component of employees’ financial health and wellbeing, is not just for large companies with extensive HR capabilities. Even with limited time and budgets, smaller companies can also implement effective financial education.
Mat Zimmerman, Market Development Manager
Why does financial education matter?
Recent research for the Chartered Institute of Personnel and Development adds further weight to the argument that financial wellbeing doesn’t only help individual workers; it supports better business performance too. The research, led by Close Brothers reflects that low levels of financial wellbeing are linked with higher employee absence and stress, and poorer mental health, performance, and decision-making. One in four workers say money worries have affected their ability to do their job.
So how do employers respond to this and better support financial wellbeing? Workforces will differ and individual priorities will change with circumstances and life stages, but there are common trends. While the research showed that adequate pay for a comfortable lifestyle is the most important factor of financial wellbeing, this was followed by being able to save for the future. Being able to pay off debt also ranked high.
That pay is a priority will not be surprising – you need to pay your people well and fairly for the work they do. What we’re really interested in is the importance of being able to save and pay off debt.
The role for the employer here is not necessarily to just increase pay – let’s take it as given that you pay employees enough that they can manage debt and save for their future. It’s about how employees can manage that pay, especially across competing short and long-term priorities. We feel that most employers, with support from the wider employee benefits industry, can make a big difference to wellbeing through financial education.
The (low) cost of financial education
Larger employers may be able to offer extensive education programmes, which could even be tailored to their workforce. Some may have the resources to develop and deliver this in-house, while others will bring in outside help from the growing industry built on wellbeing at work.
But we believe even smaller employers can deliver effective financial education, without incurring a great cost of time or money.
Since millions of workers are now saving for retirement as a result of automatic enrolment, saving for the future is becoming a natural part of work. All employers have, or soon will have a relationship with an adviser or pension provider. One of the key things employers should be asking is what extra value these organisations can bring to their workforce. Some may charge extra for these services, but many won’t – it’s in their interest to educate and build relationships with employees too.
Scottish Widows asked 2,000 workers what types of financial guidance or education they would like to access through an employer. The most popular response for every age group under 65 was financial tools and calculators.
These tools already exist – an employer’s pension provider or adviser will usually have them, as well as independent bodies such as the Money Advice Service. The role of the employer could be as simple as pointing employees in the right direction.
Research from Nudge Global suggests that this sort of intervention can be more effective when done at the right time. For example, there’s more interest in savings around tax-year-end and more interested in managing household finances in the lead–up to Christmas. Pay rises and bonus payments could also be a good time to prompt thinking around long-term savings. It’s not beyond the means of most employers to take advantage of this, especially when they communicate with the workforce through email.
Where an employee’s needs are more complex, they may need advice rather than education. Again, while some employers can sponsor advice as a tax-efficient employee benefit, others can play a role by just signposting employees to access advice themselves.
Ultimately, these actions, whether large or small, can help bring business benefits through improved employee wellbeing, and are well worth considering for employers of all sizes.
CIPD / Close Brothers (2017) Employee financial well-being: why it’s important
CIPD / Close Brothers (2017) Financial well-being-the employee view
Scottish Widows (2016) Workplace Pensions Report
Nudge Global (2017) The Financial Education Yearbook 2016/17
Information correct as at April 2017