Employees need appropriate information, education and advice in order to help them achieve good outcomes from their decisions to save, spend and borrow. This can be anything from how to decode your payslip to understanding how to save for retirement.
The knowledge gap
Research from the Money Advice Service shows that 85% of young adults aged 16-25 wish they’d been taught about money management at school; you may look back on your own schooldays and wish the same thing. Many people struggle with how to manage money but may be unwilling to admit gaps in their knowledge for fear of looking silly.
The Money and Pensions Service concludes that in the UK the complexities of the financial system, changes in social attitudes and a retail-led culture have all outpaced the ability of consumers to develop individual money management skills. The most obvious consequence of this shift can be seen in the UK’s high levels of household debt.
Even before Covid-19, the Money Advice Service estimated that 8.3 million people in the UK had problem debt, meaning that they struggle to cope with the money they owe. The pandemic has pushed many households into difficulty because of life events like job loss or a period of illness, which means their income has gone down. This rise is a serious concern because the strain of unmanageable debt is closely related to wider problems in people’s lives such as financial exclusion, family breakdown and poor physical and mental health.
What can employers do?
Employers have a key role to play here. They can enable employees to make informed decisions, as well as help them feel more in control of their finances. Organisations can help their staff through signposting them to relevant guidance, information and support, as well as providing this themselves, either directly and/or through a trusted partner.
There is a wealth of financial advice available via the internet, which is good, but so much information to sift through can feel overwhelming. It helps to have guidance come from one trusted source, such as an employer – ideally in a format that makes the advice easy to digest and act on.
For example, you could offer webinars or conferences, clinics, 1:1 financial mentoring, support groups, assessments and budgeting advice. Employee assistance programmes often have a 24/7 helpline which means that even ‘hard to reach’ employee groups can access guidance when they need it.
It may still feel taboo in UK society to discuss money. Employers may feel they are intruding by offering advice on such a sensitive subject, and would prefer to leave individual employees to manage their own money.
But providing financial education puts power in the hands of your employees to increase their knowledge and make the right decisions for their circumstances. If people feel more in control of their finances, this has huge benefits in terms of mental health and self-confidence, as well as the associated positive changes in social mobility.
Education really is the key to your financial wellbeing strategy. It helps employees join the dots across all benefits and understand how to use these benefits to help with their own financial issues, plans and goals.
The author is Karen Thornley, chief commercial officer at Personal Group.
Article published on REBA on 23rd July 2021