An employer’s approach to financial wellbeing

The ancient proverb of “give a man a fish and feed him for a day, teach a man to fish, and you’ll feed him for a lifetime” applies to the approach we are taking at Shadforth Financial Group to employee financial wellbeing.

Many employers are aware that financial issues are the leading cause of stress for one in two Australians[1]. It’s no longer the case of simply providing employees with their salary. Equipping them to make good decisions with their money can help them over their lifetime.

Financial literacy vs financial wellbeing

While many areas of financial affairs may be complex, respondents across generation X, Y and Baby Boomers report the top reason they are not currently ‘Living the Dream’ was due to their “low bank balance”. Their biggest regret in relation to their finances is “not saving enough.”[2] Similarly, the Workplace Financial Wellness Index[3] also suggests some employees need education in areas including simple budgeting and debt management.

While many employees know their monthly salary, our experience with clients highlights that many don’t have a solid understanding of their spending habits or total household expenditure, regardless of their income level.

We all know the golden rule to spend less than you earn. By itself, this concept isn’t difficult to understand. However, the psychology of buying and the use of cognitive biases by marketers in their product placement and pricing, impacts our spending behaviour.

Simply focusing on financial literacy alone has become outdated. Financial literacy programs that focus on ’the numbers’ are no match for the barrage of biases begging Australians to spend their money. It is therefore important to analyse an individual’s buying behaviour in an effort to make the most of their available cash flow.

Research released recently by ANZ[4] suggests that focusing on how individuals ‘manage money’ does not result in affecting financial behaviour. Rather, the environment surrounding the individual needs to be taken into account, such as their household circumstances as well as broader factors such as the state of the economy.

On the other hand, financial wellbeing looks at addressing and reducing financial stress. This is more of a psychological state rather than a quantitative measure of wealth. In this state of financial wellbeing, individuals tend to have enough understanding of their money behaviour to make great money decisions and extinguish stress around their financial position.

Australians’ money behaviour

Despite one in two Australians reporting feeling stressed financially[5], an Investment Trends survey found that 56% of respondents felt they didn’t need financial advice, 39% didn’t think they had enough money to make seeking advice worthwhile and 21% thought it would cost too much money if they did seek help.[6]

The Workplace Financial Wellness Index[7] suggests that financial literacy is a barrier to financial wellness, and those employees who have undertaken personal advice have a higher level of financial literacy than those who have not.

Also, Australians are not great at ‘getting moving’ with their finances. A Queensland University of Technology study[8] showed that the perceived effort of changing service providers was holding back Australians saving more than $11.6 billion on services such as banking and utility providers.

Financial wellbeing programs

Employers offering employees the opportunity to seek help in understanding and enhancing their financial affairs can benefit from avoiding the cost of low financial wellness in their organisation, which manifests itself in absenteeism and low morale amongst staff[9].

Many employers have incorporated access to a database of financial information as a part of a wellness initiative. However, the benefit of these is limited by the motivation of the employee to access and then apply these resources to their own circumstances.

It’s like a 24-hour gym where the equipment is ready for use; however, the employees may not understand how to operate the machinery, they may lack the motivation to ‘get moving’, or simply don’t see the need.

Shadforth’s approach to financial wellbeing

Personal finance encompasses a combination of day-to-day expenses, long-term savings and strategies to both protect and enhance wealth. It’s often difficult to view these varied, and sometimes complex, components in a clear and simple manner, and then decide where to start.

Shadforth’s financial wellbeing program offers employees at any financial literacy level, a guide to the most appropriate direction from both a numbers and behavioural perspective. Whether it be to concentrate on their cash flow, analyse their spending behaviour or delve into something more complicated such as superannuation strategies and the appropriateness of their insurance cover.

Thaler’s Nobel Prize for Economics-winning ‘Nudge Theory’[10] may indicate that providing access to an education seminar to stimulate an employees’ interest in their financial situation, could entice them to seek a one-on-one meeting with an adviser. This provides a clear path to advice, thereby enhancing the employee’s financial wellbeing and giving guidance on where they need to focus their efforts.

The Workplace Financial Wellness Index[11] suggests that employers should be “constantly aiming to improve the financial wellness of their employees, as there is ‘no final state’. Everyone’s financial situation should be constantly monitored and can always be improved”.

Since Hawthorne’s studies in the 1920’s and 1930’s[12], employers have focused on social aspects in order to increase productivity amongst their employees. However, including a financial wellbeing component to a staff benefits package can offer employees an opportunity to discuss their financial stresses with an adviser who can help. Employers who have implemented such programs, have reported that their employees’ wellness has improved[13].

While 15-minute workplace massages are often a welcome inclusion to many employee wellness programs, a financial wellbeing service can alleviate the cause of your employee’s stress, rather than only treat the tight shoulders financial worries can cause.

A comprehensive financial wellbeing program such as Shadforth’s equips employees to make informed decisions with their money – enabling them to reduce their day-to-day money stress and set them on a path to provide for their lifetime.

By offering your employees an effective support program, you can help empower them to take action to improve their financial wellbeing.

David Harvie, national financial wellbeing manager, Shadforth Financial Group. If you are interested in finding out more about Shadforth’s Financial Wellbeing Program contact David Harvie on 02 9919 8849, 0412 462 881, or David.Harvie@sfg.com.au

[1] Stress and Wellbeing in Australia Survey, 2014, Australian Psychological Society

[2] “FPA ‘Live the Dream’ 2017 National Research Report, courtesy of www.moneyandlife.com.au/livethedream

[3] Workplace Financial Wellness Index, Workplace Super Specialists of Australia, 2016 (Core Data)

[4] ANZ Financial Wellbeing Report, 2018, available from https://bluenotes.anz.com/posts/2018/04/financial-wellbeing-2018--full-coverage

[5] Stress and Wellbeing in Australia Survey, 2014, Australian Psychological Society

[6] Investment Trends, Investment Trends 2015 Direct Client Report

[7] Workplace Financial Wellness Index, Workplace Super Specialists of Australia, 2016 (Core Data)

[8] Australians’ switching behaviour in banking, insurance services and main utilities (2015) Queensland University of Technology

[9] Workplace Financial Wellness Index, Workplace Super Specialists of Australia, 2016 (Core Data)

[10] https://en.wikipedia.org/wiki/Nudge_theory

[11] Workplace Financial Wellness Index, Workplace Super Specialists of Australia, 2016 (Core Data)

[12] https://www.economist.com/node/12510632

[13] Workplace Financial Wellness Index, Workplace Super Specialists of Australia, 2016 (Core Data)