Financial wellbeing is often misunderstood. This article will dispel the five main myths that can hold employers back from viewing financial wellbeing as a priority.
Myth 1: Financial wellbeing is the same as financial education
Financial education and financial wellbeing both have a role to play within your financial wellbeing strategy but are not the same.
Financial education - gives you the knowledge and tools to understand your finances (calculating APR’s, doing budgeting and planning).
Financial wellbeing – is all about your behaviours, spending, borrowing and saving habits and how they make you feel (low-interest salary-linked loans, salary-linked savings, on demand pay).
Crucially, financial education can take years to create behavioural change, and knowledge alone doesn’t actually enable change. Therefore it is important to create a holistic financial wellbeing strategy that offers both financial education and financial wellbeing opportunities.
Myth 2: Finances are a personal matter. There is not much an employer can do to help.
It is a problem for employers and one that can and should be fixed. In reality, 40% of people are worried about money. These people are:
880% more likely to have sleepless nights
760% more likely to not to be able to finish daily tasks
600% more likely to have a lower quality of work
220% more likely to be looking for a new job
It’s costing your business
Our research has found that the cost to businesses in lost productivity, absenteeism, increased leaver rate and training costs is 13-17% of payroll.
Myth 3: We don’t need a financial wellbeing strategy because we already have a mental wellbeing one.
Without having a proper financial wellbeing strategy in place, other mental health strategies will be undermined. Financial wellbeing is a major driving force behind a person’s overall wellbeing and has a big influence over mental health.
The shocking findings from our 2018/19 survey revealed that those with financial worries are:
380% more likely to suffer from anxiety and panic attacks
470% more likely to be depressed
Myth 4: Financial wellbeing is all about income
Financial wellbeing is actually linked to an individual’s borrow, save and spend habits rather than how much they earn. Our research has found that 33% of those employees that earn more than £60,000 annually are regularly running out of money. Those who are earning the most, have the same levels of stress as those earning the least.
Myth 5: Financial problems only impact a minority of people
Financial wellbeing is actually to do with a mix of socio-economic and cultural factors that shape our attitudes and behaviours towards money.
Salary Finance use a Financial Fitness Score from 1-5, based on 10 behavioural questions, to measure employees’ levels of financial wellbeing.
Even though the average UK score is 3.1, the highest percentages lies at score 2 and score 4. These groups behave very differently.
2s are just about getting by and find it easier to spend than save
4s have a financial plan in place and are choosing to save rather than spend
Breaking the cycle of debt:
If an employee has a less-than-perfect credit score they will struggle to get a low-cost bank loan and will rely on credit cards, pawn shops and 500%+ payday loans for borrowing. Without the ability to pay-off debts, they will be stuck in a financial prison.
Salary-linked loans build credit scores by making it unlikely an employee will ever miss a payment and reduces risk of default
Salary-linked savings ensure people save first and spend what’s left over, helping to build resilience just like 4s and 5s
For more information on how to build your financial wellbeing strategy download our guide on this topic.