A lack of savings and regularly running out of money before payday are leading to low levels of financial wellbeing and reduced productivity amongst the UK workforce.
Research carried out by Salary Finance has shown that 34% of working people regularly run out of money before their next pay packet, nearly a third of UK households have no cash savings at all, and 70% of us save less than £100 a month.
This contributed to four in every 10 people having financial worries – something than impacts both their personal and professional lives.
To understand how to support better financial wellbeing for workers Salary Finance has launched the Employer’s Guide to Savings based on a Financial Wellbeing Survey of 10,053 UK employees and a further survey of 2,000 Brits to understand rainy day saving habits.
This research revealed that money worries often stem from a problem with cash flow and a regular pattern of running out of money. For example, a bill that is not in time with an individual’s wage can create a need for instant credit with a high interest rate if that person has no savings.
Those with financial worries are much more likely to experience stress and a depressed mood – detrimentally impacting their overall wellbeing. Compared to people without money troubles, workers with money worries are 8.8 times more likely to have sleepless nights, 4.9 times more likely to suffer from depression and 3.9 times more likely to be suffering from panic attacks.
However, it is not true that to improve financial wellbeing employers need to offer a pay increase to their staff. In fact, statistically those earning more worry on average a similar amount to those earning less about money, with 33% of employees earning over £60,000 per annum still regularly run out of money before payday and 49% of those earning over £100,000 a year having money worries versus 40% of people overall.
Instead, employers can consider ways to support and enable better behaviour. Ultimately financial wellbeing can be improved by creating a more positive borrowing, spending and saving habit for each individual.
Firstly, giving employees the ability to access an advance on what they have earned during the pay cycle can simplify budgeting and help avoid a situation where someone is running out of money before payday.
This gives people control of their finances and helps avoid a reliance on high interest loans or credit cards for one off expenses. Ultimately by giving people control of their earned wage they can create a better structure around their spending, meaning cycles of debt can be broken.
Secondly fostering improved savings habits via salary linked savings accounts can be very beneficial. If the money goes straight from the salary into savings, rather than a current account, it simply isn’t ‘missed’. This can be a great help in sustaining a savings habit once it is started.