David Haigh: Low-cost financial education interventions can deliver a high return on investment

The Chartered Institute of Personnel and Development (CIPD) reported in its January 2017 Financial wellbeing: the employee view research with Close Brothers Asset Management, that money worries have affected the ability of one in four employees to do their job. It found that people at all wage levels can be at risk of poor financial wellbeing. It only takes one adverse life event to move a person from coping to struggling financially.

Businesses and organisations are feeling the impact of this poor financial wellbeing. Research shows that financial stress causes both health and psychological issues. Payroll benefits provider Neyber found in its The DNA of financial wellbeing report, published in May 2016, that the UK economy lost £120.7 billion due to financial stress, as well as 17.5 million productive hours due to money-related absence in the 12 months preceding February 2016. In addition, the Financial wellbeing: The last taboo in the workplace? report, published by Barclays in May 2014, noted an estimated 4% loss in productivity due to poor employee financial wellbeing.

Financial education in the workplace can have huge benefits for both employees and employers. If people take positive actions to engage with their money, such as budgeting, shopping around, or considering relevant insurance policies, the net benefit to the individual is substantial. But what should employers focus on to ensure that employees value the benefit, and that employers see a return on investment?

We know that financial education is most effective when it is relevant and provided at the time it is needed, for example, giving information at key stages such as when they receive their first wage packet, pension enrolment or planning maternity leave. Understanding what staff need and when will have the biggest impact.

Interventions do not need to be dramatic or expensive to be effective. There are many simple, low-cost, high-return ideas. Adding a recommended savings figure to pay slips can help develop good savings habits. Providing staff with an online budgeting tool could also help employees to keep track of their spending and make better decisions with their money. Organisations could also signpost to online help and resources for more information.

David Haigh is director of financial capability at The Money Advice Service