Why financial education matters 

With inflation putting pressure on everyone’s wallets, financial education and wellbeing must be a priority for employers to get the best from their employees.

We know financial stress directly impacts employee health and their ability to do their job. For many employees, the effects of the pandemic followed by the significant price increases in the past 12 months have raised financial stresses higher than ever.

While many employers are aware of this, Mercer’s Financial Wellbeing Index indicates that two thirds of companies are yet to implement any formal financial wellbeing programme. This is despite our recent Inside Employee Minds study indicating that better financial education and support would have the greatest positive effect on employees after reducing workloads. Financial education means providing employees with the know-how to take control of their money. Whether it’s providing information on savings products such as pensions, or helping with issues such as debt management, financial education is about empowering employees to make healthy financial decisions.

More than two thirds (69%) of low-income employees – those earning less than £40,000 a year – have reduced their spending in light of high inflation, while nearly a quarter report using their savings or tapping into money set aside for the future to cope with high costs now. One in 10 has taken on an additional job. Our Inside Employee Minds study shows that it is a similar story for higher earners.

This clearly indicates that employees do not feel in control of their finances, and their actions are reducing their ability to cope with shocks, plan for the future, and have financial freedom.

We believe it is vital that more companies invest in the financial education of their employees. 

It’s time to act.

For many employees, the effects of the pandemic followed by the significant price increases in the past 12 months have raised financial stresses higher than ever.

What is financial education?

Making good financial decisions does not come naturally. At the same time, however, many people can feel judged or ashamed if they struggle to balance a personal or family budget.

This can lead to significant stress, especially when bills are increasing. It can raise the likelihood of people running up credit card debts or taking out short-term loans – compounding the stress they are under and undermining their ability to be productive at work.

Employers have a key role to play in helping employees get a handle on their finances. As an employer, you’re seen as a trusted source of information – and you can use this to the benefit of your employees and your business.

Educating people to understand and take control of their money can be liberating for individual employees and bring productivity benefits to employers. Whether it is helping them manage their debt, understand their pension, or put money aside for a rainy day, giving them this support can help with employee satisfaction and retention.

But financial education is not a one size fits all approach. The first step, as with any employee benefit, is understanding what your people need and the help they require. A good financial education package might call on a range of financial education services which employees can draw upon at different stages of their lives and as their circumstances change.

Mercer has a range of financial education services we can offer to your employees covering budgeting, protection, mortgages, debt management, and many other areas, all of which can be tailored to suit your employees’ unique needs - contact us today to find out more about our financial education offerings

The four pillars of financial wellbeing

Improving financial education paves the way to better financial wellbeing. We measure this using four ‘pillars’, describing the elements that support people to manage their finances effectively.

These pillars are the foundation of the Mercer Financial Wellbeing Index, which is designed to help employers assess their financial education and wellbeing offerings and identify areas of improvement.

The first step, or pillar, is giving people the ability to cover regular monthly expenses. This is the main issue concerning employees, according to our Inside Employee Minds study, and is especially the case for those aged under 55.

Many have cut back on spending and saving to cope with higher prices, making changes to their lifestyle and even taking on additional employment.

Gaining control over day-to-day spending means an individual can manage their regular financial obligations, including food, clothing, rent and mortgage payments, and utilities. It can also mean ensuring debt is serviced, manageable and under control. 

Consider coaching sessions around budgeting and debt management to help employees get control over their day-to-day spending.

Perhaps the washing machine breaks down or the car gets a flat tyre. Without extra money set aside, individuals can find such events extremely stressful. They may be forced to cut back or forgo other payments to meet this expense, or even take on additional borrowing.

Ensuring that people have ‘rainy day’ savings means these incidents will cause less stress, by giving them the means to deal with unexpected expenses and reducing the likelihood of additional debt burdens.

Consider promoting short-term savings through product availability or training to boost employees’ understanding of the importance of having an emergency savings pot.

Saving for a holiday, putting money aside for children, or increasing pension contributions require long-term thinking – but that can be hard when the present is taking up all your mental bandwidth.

While younger workers are concerned about covering day-to-day expenses, once employees pass the age of 50, our study shows their attention turns towards retirement. The ability to retire is one of the top concerns cited by respondents to our Inside Employee Minds survey, with less than a quarter (24%) of those earning less than £40,000 saying they are confident they will be able to stop working and live comfortably. This compares to 57% of higher-earning employees.

This gives employers an opportunity to provide access to retirement planning support, helping their employees to make good choices on saving and putting them in a strong position to enjoy retirement. This may add value to a company’s rewards and benefits package, and may also boost retention and aid with succession planning in key roles.

Good financial education gives people an important freedom – the freedom to make choices. 

Being less financially constrained means employees can consider alternatives that were previously out of reach. It may be something as simple as buying better-quality goods or taking some time off work to recharge.

Equally, though, the freedom to make choices can help people make more significant decisions. Perhaps they want to invest, to save for a mortgage deposit, or to pay down debt.

In any case, a supportive and holistic financial education and wellbeing programme will increase employees’ ability to make those choices. Giving them this financial empowerment will help employees have more control over their lives, with clear positive effects on their ability to focus on their work to the best of their abilities.

Optimising your financial wellbeing package

Our research shows that companies are, on average, scoring particularly well on supporting their employees with retirement planning, but other elements – such as day-to-day budgeting and preparedness – are far less supported .

As an employer, to truly support your workforce and boost your financial education strategy, there are several steps you can take.

By providing coaching sessions – either one-to-one or in groups – you can help employees get to grips with different areas of the financial services world. From the very basics of taxation and savings to the importance of budgeting, and from understanding mortgages to managing credit cards, there are a range of skills you can help your employees develop.

Our Financial Fundamentals sessions can be delivered virtually, in-person, or a combination of both, to fit to your company’s working patterns. We can also deliver one-to-one coaching sessions. Whatever the format, you’ll have the option of one-hour, half-day, or full-day sessions depending on your needs and budget.

These workshops provide employees with key skills around the basics of money and positive financial behaviours. This includes debt management guidance, budgeting, financial products, and wider wellbeing resources.

We also offer a digital financial wellbeing resource as a one-stop shop for our cost-of-living support materials and resources – making it easy for employees to access the information they need, when they need it.

It’s important to be able to design a financial education package suited to your business. By tailoring your offering, you can support employees in different age groups, working arrangements, and levels of seniority according to their needs. This also helps you get the best from your financial education programme within your budget. 

Financial wellbeing is the key to employee satisfaction and performance. It’s time to make it work for you, too.

Speak to us today to find out more about Mercer's financial wellbeing and benefits offerings and how they could help you and your employees.

About the author(s)
Rachel Coles
James Collins
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