Between the 9th and 15th of September is UK Savings Week. In the current environment, it has become difficult for a lot of people to save as much as they would like, in fact, a survey [1] of working adults by WEALTH at work found that the biggest financial concerns for the year include not having enough savings for unexpected costs (40%) and not being able to save enough for the future (38%)
This can have a serious impact on financial resilience, with the weight of this financial burden spilling into the workplace. Almost two-fifths (38%) of workers admit that money worries affect their performance at work by causing increased stress levels, mental exhaustion (33%) and decreased motivation (26%). A fifth (20%) admit that it led to reduced focus and concentration, and almost one in ten (9%) say it led them to take more days off work unwell.
With this in mind, WEALTH at work has prepared the following tips for employers to help employees build their financial resilience
Understand the needs of employees
Employees are likely to have different financial priorities depending on their life stage. For some the priority may be saving a deposit for a first home, whilst for others it might be saving for retirement, or for some it may be paying off debt. It’s important that employees put a plan in place on how to reach their goals and they may require support to do this. It therefore helps to design a programme which supports differing requirements.
Provide support on the basics
Many people struggle to understand basic financial issues and helping employees become more familiar with them, is an important step. For example, employees could start by reviewing their outgoings, everything from bills and subscriptions to food shopping and going out. Really looking at what is spent can often highlight areas that could be cut back on. A great example of this is insurance as it is often the case that someone would get a better quote by shopping around and using tools like comparison sites, but many neglect to do this.
Promote the employee benefits package
Employees should be encouraged to investigate the range of workplace benefits that may be available and suitable for them. Our research[2] with REBA of almost 200 employers found that support is growing for saving products, with many workplaces set to offer pay as you earn saving schemes such as help-to-save and opt-in payroll savings, employee share plans and tax-free saving wrappers such as ISAs. Some employers will also match any additional pensions contributions that employees may not be aware of. For example, someone in their 20s can increase their pension pot by 25% by saving just 1% more if their employers were to match this. Making sure benefits are relevant and well-explained can really help take up and improve money management.
Help employees understand the difference between good & bad debt
Another important principle for employees to understand is the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure that it’s a good deal. At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. Employees should realise that it should always be a priority to pay off bad debt. For example, a debt of £3,000 with a rate of 18% APR, could take 10 years and 10 months to pay off paying £52 a month, with total interest of £3,836 paid. If that monthly payment was increased to £100 a month, the debt would be paid off in 3 years and 4 months, and interest paid would be only £1,011. If this was increased to £325 a month, the debt would be paid in 10 months, with total interest of £253 paid
Stress the importance of an emergency fund
A lack of savings can have a serious impact on financial resilience. Many people unfortunately realise too late the importance of having emergency savings. Ideally, employees should have 3-6 months of savings which can be accessed at short notice should they or another member of their household face a fall in income due to redundancy, illness, or any other expense e.g. replacing the boiler or expensive car repairs. Remember that workplace savings can help with this.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “Many employees don’t recognise the importance of financial resilience until something happens which highlights how vulnerable their finances are. Building a good financial wellbeing programme is vitally important to help employees take control of their finances and put themselves in a more secure position in the future.”
He adds; “Many employers now offer their staff financial education and guidance through workshops, digital tools and helplines to help them understand the key issues relevant to them. Topics can cover a range of financial matters such as debt & money management, managing savings and retirement. In addition, many are also putting in place workplace ISAs to help employees to start saving from monthly payroll.”