Ultimate Account Blog

The Importance of Employee Financial Wellness

financial wellness, financial planning tools

I recently attended Union Community Bank’s Annual Economic Breakfast. Typically, this event includes a number of speakers with the keynote address focused on market trends, analysis and forecasts. Of particular note at this gathering, however, was a presentation about financial wellness.

Clearly, everybody wants to be in a healthy spot financially, but there is also an incentive for business owners and management to have financially healthy employees. First of all, financial stress affects employee performance. According to a 2015 PwC survey, 37 percent of employees admitted that they spend at least three hours per work week reacting to their personal financial situation.

Employers notice even more of a result of financial stress. A Society for Human Resource Management survey indicates that 76 percent of employers noted an increase in stress at work due to financial constraints and 60 percent reported an inability to focus at work.

In addition to financial wellness having a direct effect on workplace productivity, employers should also recognize that employees who are in a better place financially will be able to retire from the workforce earlier than those who are not. Health insurance premiums are ever-increasing, and the cost to insure a worker in their late 60s or early 70s is the most expensive, so workers who are able to leave the workforce voluntarily before that age are saving their employers’ money on health insurance premiums.

The Union Community presentation noted that 89 percent of companies recognize that financial wellness programs would be worthwhile to the organization; however, less than one-fourth of companies actually present formal financial wellness training or education.

A financial wellness program is not all that difficult to create, although it will take some time to make sure that it is done properly and each employee receives the same access to the education as every other worker.

The program can include topics such as the importance of setting and maintaining a budget and setting funds aside in some sort of savings account. If a company makes a matching contribution to a defined contribution benefit plan, the value of an employee contributing should be made clear to him or her. If the company matches, say, 50 percent of the first four percent deferred, an employee will automatically get a 50 percent return on his or her investment even with no market increases by contributing even a small portion of their salary.

More complex discussion points include: understanding the difference between secured and unsecured (i.e. credit card) debt, variable versus fixed interest rates, how to calculate net worth, and a general overview of individual tax rates.

One or all of these steps can be enacted by employers to help their employees reach a level of financial comfort that makes them more productive at work and more comforted in general.

The American Institute of CPAs has an excellent website called Feed the Pig that features a host of tools and strategies for improving an individual’s financial wellness.

By Dan Massey, CPA, Manager

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