When HR leaders think of caring for the financial wellbeing of employees, it's typical to think about paying them more.
While this can certainly be a part of employee financial wellbeing, it's not the entire picture.
77% of Americans have some sort of debt. Nearly half of people with debt also have a mental health condition.
More money isn't the whole solution. Employees need help building healthy financial habits.
What is financial wellness?
Financial wellness (or financial wellbeing) includes the ability to and confidence in meeting financial obligations, including day-to-day expenses and emergencies. When we have healthy financial wellbeing, we are secure in our present and future finances, and we have the freedom to enjoy the fruits of our labor. Financial wellness is a part of overall employee wellbeing. When stress about finances ensues, mental health also suffers, along with physical health, and so on.
For this reason, the best financial wellness programs are part of a holistic mental health program that helps employees support every aspect of their wellbeing and not just financial wellness.
For more on the definition of financial wellness, check out this PDF from the U.S. Consumer Financial Protection Bureau.
Things financial wellness programs include
Here are the aspects of employee financial wellbeing you can expect an excellent financial wellness program to address:
- Budgeting. How to create a budget and stick with it so employees can pay all their monthly expenses, save for large purchases, and prepare an emergency fund.
- Debt and credit. How to get out of debt, manage debt, and prevent going into debt again.
- Insurance. How employees can protect themselves and their families if something goes wrong, so employees don't have to go into debt to cover emergencies.
- Investments. How to save for retirement, use investing tools, and increase financial security and freedom into the future (even for future generations).
Tools like meditation, therapy, life coaching, and even yoga can help employees manage their financial stress as well.
How financial wellbeing tools at work can benefit employee mental health
Financial wellness support at work helps employees have:
- Improved relationships
- Reduced stress and anxiety
- Improved sleep
- Increased generosity
- Increased wealth
- Reduced negative feelings around finances
1. Improved relationships
In a study by NCBI, approximately 40% of divorces are due to disagreements on money.
Positive financial wellbeing helps many aspects of our relationships. When employees are less stressed about money, they can spend more time and energy enjoying their families and friends. Financial wellness leads to freedom.
Better financial wellness helps families and partners reduce conflict. Financial problems tend to be the elephant in the room or a cloud looming over your head. Decreasing that stressor makes relationships—and nearly every other aspect of life—simpler and more enjoyable.
2. Reduced stress and anxiety
This is one of the most significant, furthest-reaching benefits of financial wellness.
Less stress and anxiety help us feel better and do better in every aspect of life.
When we avoid planning how to manage money, money controls us. Lack of freedom and control causes stress.
It is important to control the controllables. Personal finances are one of those controllables!
3. Improved sleep
Workplace financial wellbeing helps employees get better rest.
Adults with low stress levels sleep almost 1 hour more per night and are 25% more likely to have good quality sleep, according to the APA.
4. Increased generosity
More financial freedom allows employees to give more money and resources away.
Generosity helps boost mood and long-term mental health for the giver by reducing stress, increasing a sense of purpose, and even improving physical health.
5. Increased wealth
When employees build better financial habits, they can save more for retirement and children. They are free to spend money on the things they love.
6. Reduced negative feelings around finances
Financial stressors can lead to a lot of negative emotions, including:
Experiencing these feelings for long periods is draining and can negatively impact mental health. Financial wellness can help employees experience more positive emotions and improve their quality of life.
How mental health impacts financial wellbeing
Mental health can also affect employee financial wellbeing. Here's how anxiety, depression, and other mental health challenges negatively impact employee financial wellness.
1. Trouble staying motivated to manage finances
When we know we aren't doing well financially, especially when our mental health is faltering, checking our bank account or trying to create a budget can remind us that we aren't doing well.
Mental health challenges can also make creating a budget seem like a momentous task. It can be hard to be motivated to turn the boat in a different direction.
2. Spending to cope
Spending can help people feel better temporarily. Employees may overspend to reward themselves, get a boost in dopamine, or comply with social pressures.
Long-term overspending makes financial problems worse, along with mental health challenges.
Employees can break the cycle by educating themselves about financial wellness and making a budget.
3. Lack of spending
For some, mental health challenges can have the opposite effect. People may neglect their wellbeing further by not buying enough groceries or other things they need to take care of themselves due to exhaustion or lack of self-worth.
Others may feel guilty for spending money or feel fearful whenever they spend. This can cause a person to be in a constant state of fear.
4. Difficulty focusing
Financial stressors put more pressure on employees to keep their jobs. Ironically, this can make it more challenging to focus on work and do a good job.
How a financial wellness program can benefit your company
In 2020, 47% of employers gave employees access to financial advisors, while 45% provided financial wellness benefits to help employees create good financial habits.
Since the COVID-19 pandemic, employees are starting to expect more support in this area (and every aspect of wellbeing) from their employers.
Companies that offer financial wellness benefits help create cultures that put employee wellbeing first. This can lead to:
- Higher retention
- Greater ability to attract talent
- Improved productivity and motivation on the job
- Greater employee morale
- More creativity
- Boosted employee happiness
Less employee stress will benefit your workplace. Addressing financial wellbeing—the #1 stressor in America—is one of the best ways to reduce employee stress and stand out as an employer.
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