Financial Wellness Programs Should Build Employee Confidence

Workers throughout the United States are struggling with managing their finances, and that stress could spill into their company’s bottom lines.

According to a recent survey by Mercer, employers could lose up to $250 billion in lost wages due to employees worrying about money. The firm finds that employees on average spend about 150 work hours worrying about finances each year. On average, employees spend about 13 hours per month worrying about finances, with 16% of those surveyed reporting they spend more than 20 hours. These situations could have dramatic effects on employee engagement, absenteeism, productivity and even health care costs.

In response, more and more employers are turning to financial wellness programs. But while it is a hot topic in the employee benefits world, financial wellness is often difficult to define. Mercer notes that financial wellness is not just about having a good grip on financial literacy, and programs that focus on this concept alone may fail to deliver. Instead, the firm suggests programs need to improve what it calls “financial courage,” or the confidence to engage in financial issues. Mercer says certain tools can enable employees to approach these challenges in simple ways that won’t require a very high level of financial literacy. It points to options like budgeting tools and coaching, credit management assistance, student loan refinancing programs, and access to non-retirement savings vehicles.   

In addition, the firm also developed the Mercer Financial Wellness Index. To measure an employee’s financial wellness, the index focuses on the following criteria: level of comfort in meeting various financial obligations, level of stress regarding financial situation, current indebtedness, ability to pay an unforeseen expense, and the ability to absorb the impact of a health-related illness. By using this benchmark, the firm shed light on the diverse financial priorities among varying participants.

It found that the biggest concern among those with low financial wellness scores was keeping up with monthly expenses, cited by 62%. This was followed by credit card debt, cited by 14%. Only 8% of those with low financial wellness scores reported saving enough for retirement was their biggest concern, suggesting that many Americans who aren’t financially well may be too concerned with immediate financial obligations to even begin saving for retirement.

On the other hand, saving for retirement is the second biggest priority for the majority of those surveyed with high financial wellness scores (22%). The biggest concern for this cohort was “other,” cited by 48%. The remaining survey choices were long-term care for yourself or spouse and health care expenses in retirement.

And while income is obviously a strong factor determining a person’s financial wellness, the Mercer survey found 14% of those in the two financial wellness groups with the lowest scores earned household incomes greater than $100,000.

NEXT: It Helps to be Confident

These findings stress the impact that the preferences and concerns of an employer’s unique workforce will have in designing the right financial wellness program. However, these programs also need to focus on building employee confidence in their ability to tackle financial tasks.

Mercer says “employees’ perceptions of their financial literacy are more important than their actual levels of financial literacy in achieving financial wellness.” Notably, those with a strong self-perceived sense of financial knowledge are more likely to seek help from advisers. Seventy-three percent of those who reported being extremely knowledgeable in finances said they’re likely to work with advisers, compared to 19% for those who reported being slightly knowledgeable.

Mercer concludes that “tools and strategies that focus on building financial courage—an employee’s confidence in his or her ability to engage in financial transactions—will be key for employers.” Based on its findings, Mercer developed the Mercer Financial Courage Index, which measures an employee’s financial courage based on the following criteria: overall attitudes toward financial matters and planning, time spent worrying about finances, preferences around financial planning, self-assessment of financial knowledge, and preference for control over investments versus reliance on others.

The full study report, “Inside Employees’ Minds: Financial Wellness,” can be found at Mercer.com.