Many people find it difficult to save enough money in the current economic climate. A survey by WEALTH AT WORK of working adults found that the top financial concerns were not having enough money to cover unexpected expenses (42%), not being in a position to save for the future (37%), and not being able pay for basic living costs like rent, mortgage, energy bills, or food. The biggest financial concerns for the year are not having enough savings to cover unexpected costs (42%), not being able to save enough for the future (37%), and not being able pay basic living expenses such as rent, mortgage payments, energy bills, food etc.
The financial pressure can be a major factor in affecting resilience. It is also a problem at work. Money worries can affect workers’ performance at work, causing stress (40%) mental fatigue (35%), decreased motivation (26%), and physical exhaustion (25%) Over a fifth (22%) of workers admit that money worries led to decreased focus and concentration. One in ten (10%) also said it increased their sick days.
In order to assist employers in helping employees improve their financial resilience, WEALTH AT WORK has developed the following tips.
Understanding the needs of employees
Employees will have different financial goals depending on where they are in their lives. Some employees may prioritize saving for a down payment on a home while others may save for retirement or pay off debt. Employees should have a clear plan on how they will achieve their goals. They may need support in order to do so. This makes it easier to create a program that supports different needs.
Support the basic
It is important to help employees understand the basics of financial matters. Employees could begin by reviewing all their expenses, from food shopping to subscriptions and bills. When you look at your spending, it can be easy to identify areas where there are savings that can be made. Insurance is a great example. Many people would be able to get a cheaper quote if they shopped around and used tools such as comparison sites. However, many do not.
Promote employee benefits
It is important to encourage employees to explore the benefits available at their workplace and determine if they are suitable for them. In our research conducted with REBA, we found that employers are increasingly supportive of saving products. Many workplaces will offer help-to save and opt-in payroll saving, employee share plans, and tax-free savings wrappers like ISAs. Some employers will match additional pension contributions made by employees that they may not have been aware of. If their employer matches this, a 20-year-old could increase their pension pot 25% by simply saving 1% more. Making sure that benefits are well-explained and relevant can help improve money management.
Help employees to understand the difference between bad & good debt
Employees should also understand the difference between bad and good debt. A mortgage, for example, is an example of good debt. It makes sense to borrow money to buy a home because it’s a manageable, stable way to borrow over the long term. It is important to review your mortgage periodically to make sure it’s still a good deal. If you don’t pay off your debts quickly, they can spiral out of control. It is important that employees understand the importance of paying off bad debt. If you have a PS3,000 debt with an 18% APR rate, it could take ten years and ten months to pay back. You would need to pay PS52 per month with a total of PS3,836 in interest. If the monthly payment is increased to PS100, it will be paid in three years and four months. The interest amount paid will be PS1,011. If the monthly payment was increased to PS325 per month, then it would take 10 months for the debt to be paid off, and only PS253 in interest.
The importance of having an emergency fund
Lack of savings can seriously impact financial resilience. Many people realise the importance of emergency savings too late. Employees should aim to have at least 3-6 months’ worth of savings that can be used quickly in the event of a sudden drop in income, whether it is due to illness, redundancy or other reasons. Replace the boiler, or make expensive repairs to your car. You can use your workplace savings to help you.
Jonathan Watts-Lay is Director of WEALTH at Work. He says: “Many employees do not recognise the importance financial resilience until they are faced with a situation that highlights their vulnerability.” A good financial wellness programme is essential to helping employees gain control over their finances.
“Many employers offer financial education and guidance to their employees through workshops, digital resources and helplines. This helps them to understand the most important issues that affect them.” Topics include debt and money management, managing retirement savings and managing savings. Many employers are also setting up workplace ISAs, which help employees start saving money from their monthly paycheck .”
The original version of this article, Helping employees to build financial resilience, appeared first on Human Resources News.
