5 Biggest Myths About Financial Wellness Programs
If you don’t have a pulse on the latest Fintech and employee benefit news, financial wellness is in every headline as companies rapidly roll programs into their benefit offerings.
If you aren’t familiar with financial wellness, it is generally used to describe the state of one’s personal financial situation. It includes an individual’s income, savings, retirement plan, debt, and other aspects of personal finances that create a holistic view of one’s overall financial health. Financial wellness programs exist to help educate individuals on the state of their personal finances and provide them with tools, resources, and solutions to establish financial stability.
An increasing number of employees are asking for support with their personal finances from their employer. They don’t necessarily want their employer to provide this support directly; they want access to benefits and resources that will empower them to improve their financial situation. According to the Consumer Financial of Protection Bureau, 40% of employees want help in achieving financial security and financial well-being.
Are you still in the process of assessing the value of offering financial wellness as a benefit to your employees? It can be tough to define the ROI, especially with so many opinions challenging the very definition of financial wellness. The holistic approach of financial management is new to some and there may be hesitation around offering it to your employees if you don’t fully understand the services and the value they bring. Read on as we dispel the five biggest myths about financial wellness.
Myth #1: Financial wellness is a fad. It’s just another benefit trend.
The beginnings of financial wellness include a 2013 study by Grinstein-Weiss, a distinguished professor at the George Warren Brown School of Social Work at Washington University in St. Louis. In her report, she concluded that “successful financial wellness programs could offer opportunities for employees to improve financial management and work satisfaction while decreasing stress,” amongst other valuable factors.
Since then, the Consumer Financial Protection Bureau (CFPB) has produced their own studies with similar findings. Their research continues to influence employers and the number of companies offering financial wellness as a benefit has doubled since 2015. The CFPB went on to release an article stating that there is a growing consensus that the ultimate measure for success with financial literacy should be an improvement in individual financial well-being.
As financial wellness gains recognition as a necessary employee benefit, large institutions continue to support the initiative, backed by their own research. In 2019, Bank of America released its Workplace Benefits Report citing that financial wellness mattered in the workplace. The report goes on to share that “when employees live their best financial lives, it shows in the workplace” and that “employers play a huge role in their employee’s financial wellness.”
Myth #2: It’s impossible to quantify the success and ROI of financial wellness.
Although it can be challenging to quantify some of the results, it is possible to gauge the success of a financial wellness program. The CFPB reports that the ROI on a financial wellness program for a company is $1-$3 per employee.
Financial wellness programs fill a need that is generally unmet in overall society. Most employees do not receive financial education during high school, college, or at home. Imagine if schools didn’t teach students to read or write? Would they be prepared for a career (or even a contributing member of society)? Unlikely.
Financial literacy follows the same concept. By the time someone starts earning a salary, they have likely not learned how to manage, save, or build wealth. Without financial education, they are likely to make uninformed financial decisions which can lead to financial instability and incredibly stressful situations.
And we all know that stress has tangible impacts on individuals in the workplace. Financial wellness programs help to reduce the stress of employees, leading to a positive impact not only on the well-being of individual employees but directly to employers’ bottom lines.
Check out these case studies of employees who have gone through our financial training program and have achieved tangible financial results – including increased savings and reduced debt. When employees feel financially secure, their ability to focus and produce while at work is greatly improved.
Myth #3: All of our employees are well compensated. They don’t need financial wellness services.
Financial insecurity and chronic economic anxiety are prevalent in all communities, at all income levels. Individuals who earn a salary that would place them in a category of ‘high earning’ face the same financial knowledge deficit as those earning less. Just because employees earn a decent salary doesn’t mean they know how to manage it.
“It’s not how much you make, it’s how much you keep.”
According to Financial Health Network, 47% of Americans spend equal to or more than their income, resulting in only 28% of all Americans maintaining a stable financial health classification. A similar study goes on to reveal that 85% of those who make less than $60,000 annually are financially vulnerable and 50% of those with earnings greater than $100,000 are also in a financially vulnerable state.
In addition to the lack of financial education, the increased cost of living, rising student loan debt and stagnant wages impact people across socioeconomic backgrounds leading to financial vulnerability across income ranges.
Myth #4: Financial well-being is the responsibility of employees.
From the founder of Zappos (who sold his company to Amazon for $1 billion) to the billionaire behind the company Spanx, CEOs overwhelming conclude that a company’s ability to succeed is dependent upon its employees feeling happy, healthy and supported in their workplace. Similar to offering medical benefits, personal finances are an aspect of employee health. Looking out for the well-being of your employees includes access to medical and financial support.
It is reported that 46% of employees deal with financial stress. Many of us can empathize with the fact that stress is hard to leave at home; and impossible for Americans in the workforce. These feelings and thoughts follow an employee and can make it difficult to focus in the workplace. The compounding impact of stress and anxiety is a heavy burden on an individual and permeates into the workplace. The resulting loss in productivity, focus and performance causes businesses to lose over $450 billion per year.
When a company invests in the well-being of its employees, the individuals and the business benefit. In a recent blog post, we gave further evidence supporting the need for employers to offer financial wellness services. For employees to seek out financial guidance from a professional on their own, they must have a substantial net-worth or income in order to afford professional services. Unfortunately, it isn’t cost-effective for many employees to receive the financial support they need.
Myth #5: All of our employees will demand a raise. We can’t afford that!
As the study shows, those with relatively high earnings also experience financial stress. While some employees may request a raise, many employees will realize that having access to a holistic, tailored financial education program with resources to help them handle financial challenges can provide greater value. Many financial wellness services that are free to the employee also hold monetary value, like one-on-one financial coaching, real-time financial dashboards that aggregate credit and bank accounts, prepaid cards, etc. Employees would have to pay out of pocket to access these tools otherwise, so being able to prove the value of the benefits you offer is also important to help provide perspective.
Motivating employees to utilize the financial wellness services you provide is crucial for your employees to recognize their real value. These tools will give them the opportunity to improve their personal financial situation and create a realistic financial management plan. By committing to a few small behavioral changes, they’ll start to see results and they’ll be encouraged to continue down the path. They will have the confidence and knowledge to reach a healthy financial status living within their current means. When the time comes that you can reward them with a raise, it truly will be a bonus.