What every company must know about their employees’ financial health

M1 Team
M1 Team October 20, 2017
Financial Health

I’ve been an HR professional now for over 8 years, including my current job as the Director of Talent here at M1 Finance. Most of the companies I’ve worked with have embraced at least some basic responsibility regarding their employees’ financial future – typically in the form of a 401(k) program.

This is an important benefit for employees, but I would contend there is far more companies can and should do to improve their staff’s financial health. I’m not talking merely about a feel-good benefit but rather one that acts as an important investment in the business. In fact, what many employers don’t realize is how directly their employees’ financial wellness can affect their bottom line. Consider this: PWC’s 2017 Employee Wellness Survey found that 46% of workers spend three or more hours at work every week thinking about or handling financial issues.

Here, a lack of financial wellness directly relates to a decrease in productivity, and it stands to reason, then, that helping employees achieve financial wellness can help improve not only their happiness but also the company’s profitability.

Another benefit? As unemployment continues to fall and skilled employees have their pick of jobs, employers will need to find ways to attract and retain top talent. Helping to pay gym memberships or cell phone bills is nice, but they treat the symptoms of financial wellness rather than the underlying causes. By offering employees the resources they need to achieve and maintain financial wellness, they’ll be more likely to stay with you – and less likely to leave because someone else offers a slightly higher salary.

Engaging Employees for Improved Financial Health

Before I go into what a financial wellness program could look like, let me clarify the M1 stance on what it takes to be financially healthy. Financial Wellness is the comfort and confidence that you’re on the path to meet your financial goals. Further, we believe the only way to reach that level of financial wellness is by being engaged with and understand your personal finances.

To illustrate my point – and since I love being outdoors – let’s talk gardening:

To understand the importance of engagement, think of your finances like a garden: you’ve got some zucchini, some tomatoes, a few types of flowers, maybe even a couple apple trees in the yard. If you just plant a bunch of seeds and hope for the best come harvest time, you’re in for a disappointing haul. Sure, you’ll probably get a few apples, but probably not the robust crop you were hoping for.

That’s because gardens take maintenance. You have to weed, water, fertilize, watch out for pests and molds, put up fences to keep out deer, and so on. And you can’t just use a one-size-fits-all approach, either: you have to know something about each plant to diagnose problems and find solutions.

Now consider this: Standard & Poor’s 2015 Global Financial Literacy Survey found that only 57 percent of Americans are financially illiterate. It’s no wonder that the PWC study I mentioned earlier found that 52 percent of us are stressed out about our finances, as we are all naturally overwhelmed by what we don’t understand.

And it’s easy to see how our ignorance can lead to inaction. From what I’ve seen, people tend to justify avoiding their financial issues by telling themselves one of two things:

  1. Personal finance is too big for me to tackle, so I won’t even try.
  2. I don’t have enough money to do anything right now, so there’s no point in even trying.

These narratives suggest that personal finance is unmanageable and unsolvable. And they set the stage for serious problems in the event of an unexpected expense, sudden illness, job loss, or other financial emergency.

Financial Wellness in the Workplace: How to Get Started

There’s no single way to establish a successful financial wellness program in your office. Depending on available resources and the challenges your employees face, you might consider offering employee discounts to financial education courses, hosting learning lunches, incentivizing signups for financial programs, and more.

Specifically, many employers are finding success by offering help with:

Student Loans: The average 2016 graduate left school with more than $37,000 in student debt. While you may not be able to put money toward paying down that debt, you can make available financial counseling services that include strategies for refinancing loans at a lower rate or even setting up a budget and payment plan.

Retirement Investing: Many companies offer 401(k) programs, but few provide employees with guidance on how to allocate their funds. Making valuable insights like this available can-do wonders for your employees’ peace of mind.

Independent Investment Options: M1 Finance is an independent investing platform designed to help people become engaged managers of their financial success. We work with employers to offer our platform at no cost to the company in order to provide a discount for employees, so they can become better at putting their money to work over the long term. Making investment options like this easily available is a great first step toward engaging employees in their financial wellness.

Debt Refinancing: Whether it’s from medical care, a mortgage, or credit cards, debt can hang over people like a dark cloud. Strategies for refinancing should be available from any financial wellness program.

If you’re not sure where to start, consider conducting an anonymous survey to ask whether employees would be interested in learning more about any of the above.

One final thought about financial wellness: the goal here is not to get all your employees debt-free or help them become super wealthy. Rather, companies should focus their financial wellness programs on empowering their employees with the tools, resources, and knowledge they need to confidently tackle financial challenges for a lifetime.