Articles

A Financial Wellness Program Can Increase Productivity and Retirement Readiness

Mar 29, 2021

Financial wellness” has recently become a popular way to gauge the state of a person’s financial situation. It is not used to measure wealth, and there is no magic dollar amount that someone can earn or accrue to achieve it. Rather, it refers to a person’s progress toward some universally accepted financial goals, no matter their level of income. In that context, financial wellness generally refers to:1
 

  • Control over daily financial needs and month-to-month budgets
  • The capacity to absorb a financial shock
  • Adequate retirement savings, or being on track to reaching that goal

When individuals struggle in one or more of these areas, it affects not only their finances, but their stress levels, their health, and often their performance at work. Employers can help their employees avoid these consequences by offering a financial wellness program. These programs generally provide education, resources, and tools to help employees understand financial wellness concepts and how to achieve their financial goals.

 

Do employees really need help with their finances?

In early 2019, even though the economy was booming and unemployment was low, two-thirds (67%) of employees said they were stressed over their finances.2 Far more people stressed over their finances or money matters (59%) than their job (15%), relationships (12%) or health concerns (10%)).2 The COVID-19 pandemic and the negative financial consequences suffered by so many Americans have undoubtedly exacerbated many of the financial stressors already being experienced.
 
Employees who are stressed about their finances are significantly more likely than employees who are not stressed about finances to show the following signs of financial un-wellness:2
 

  • 67% consistently carry credit card balances
  • 45% find it difficult to make minimum credit card payments on time each month
  • 57% have less than $1,000 saved to deal with unexpected expenses
  • 68% report having saved less than $50,000 for retirement
  • 42% expect to have to work in retirement

These types of financial stress have been shown to affect workers’ physical well-being as well as their productivity on the job and even absenteeism rates. Almost half (47%) of stressed employees say that finances have been a distraction at work, and half of those who are distracted at work say they spend three or more hours of work time each week thinking about or dealing with issues related to personal finances.2 Employees also self-report their productivity at work has been negatively affected (26%) by financial stress, and 78% of stressed employees said they would be attracted to working for another company that cared more about their financial well-being.

Will employees use a financial wellness program?

More and more, employees are looking to their employers for education and guidance regarding financial goals. Saving for retirement has long been associated with employer-sponsored retirement plans, but many employees are now also seeking help with budgeting expenses and prioritizing debt repayments, in addition to achieving long-term financial goals. In 2019, 27% of employees surveyed said a “financial wellness benefit with access to unbiased counselors” was their most wanted employer benefit (for those that didn’t already have it).2 Coming in a close second, 26% of employees said they wanted a student loan repayment benefit; this percentage increased to 37% for Millennials.2
 
Among employees whose employers already offered assistance with personal finances, 71% said they used the services.2 The two issues employees tend to seek help with are spending and debt. Getting these aspects of financial well-being under control can benefit other areas of financial wellness, such as retirement savings.
 
More employees (42%) reported they are most likely to seek financial guidance when they need to make an important financial decision, like buying a home or making saving or investment decisions, rather than when they are in a financial crisis (25%).3 So it’s important to provide financial education and tools to employees before they are in crisis, when they are most receptive and in a position where they can make behavioral changes.

Can an employer benefit from offering a financial wellness program?

Surveyed employees said that financial worries have negatively affected their health (32%), relationships at home (32%), productivity at work (21%) and attendance at work (10%).2 It’s been well documented that stress has significant effects on our health such as headaches, muscle pain, chest pain, fatigue, stomach upset and sleep problems. These physical changes can result in anxiety, lack of motivation, anger, and depression. Individuals who can lessen the sources of their stress will be healthier and happier, which will lead to less time off work and more focused, productive employees at work.
 
One industry report created a hypothetical example to illustrate the cost of distracted employees at work and the benefit a financial wellness program could provide to the employer’s bottom line in addition to reducing employees’ financial stress. In this example, a company with 10,000 employees could expect to have 3,500 employees financially stressed, which could equate to $7.1 million annually in lost productivity (calculated at 3 hours/week at $30/hour). If the employer could reduce that distraction due to financial stress by even 1 hour for each of those employees, the employer could recoup 1/3 of that loss, or $2.4 million each year.4
 
A real-life case study measuring employee financial stress over an eight-year period found that financial stress levels dropped in half with the addition of a financial wellness program.4 Employee survey responses showed improvements in job satisfaction, life satisfaction, and a reduction in overall stress. Individuals with lower stress levels were found to be two times more likely to stay in their employment and missed an average of one less week of work per year due to short term disability.4  This led to improved productivity, and the higher retention rates lowered administrative expenses related to employee turnover.4

Should I consider offering a financial wellness program?

Employers may want to explore offering a financial wellness program regardless of the size of their workforce or the average levels of compensation paid to employees. Most employees can benefit from education and assistance with financial planning associated with life events, such as paying for higher education, buying a home, caring for an elderly relative, and saving for retirement – even if they are not financially stressed.

 

Newport’s Financial Wellness Center

Newport’s all-digital Financial Wellness Center (FWC) helps prepare participants for retirement and beyond. The FWC offers a seamless, integrated website and mobile experience that gives participants access to a library of multi-media financial wellness resources.

The FWC addresses key financial topics, such as Retirement Planning, Investment Strategies, Debt and Credit Management, Education Funding, Health Care and Insurance, and much more. The FWC experience is customized for each participant based on site use and interactions. Participants can then use dynamic “calls-to-actions” to take their next best step towards retirement.
 
¹ Consumer Financial Protection Bureau, “Why financial well-being?” accessed March 19, 2021, https://www.consumerfinance.gov/consumer-tools/financial-well-being/about/?_gl=1*1nhu8ty*_ga*MjUwNDk3OTM1LjE2MTYxNzE2MDI.*_ga_DBYJL30CHS*MTYxNjE3MTYwMS4xLjEuMTYxNjE3MTY2Ny4w
2PwC’s 8th annual Employee Financial Wellness Survey, PwC US, 2019, https://www.pwc.com/us/en/industries/private-company-services/images/pwc-8th-annual-employee-financial-wellness-survey-2019-results.pdf
3 PwC’s 9th annual Employee Financial Wellness Survey, 2020 COVID-19 Update, May 2020, https://www.pwc.com/us/en/industries/private-company-services/images/pwc-9th-annual-employee-financial-wellness-survey-2020.pdf
4 Retirement Advisor Council, Viewpoint: A Return on Wellness – Measuring Financial Wellness Programs, 2020, https://www.retirementadvisor.us/pdf/return-on-wellness.pdf
 
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