With the increasing high cost of living, financial wellbeing is becoming more of a focal point.
Financial wellbeing is defined as the state of being financially happy and healthy. It includes financial distress and financial strain. This includes making the most of an adequate income to enjoy a reasonable quality of life and having the skills and capabilities to manage money well, both on a daily basis and for the future (CIPD, 2021).
One in four workers report money worries have affected their ability to do their job, one in ten say they have found it hard to concentrate/make decisions at work because of money worries and 19% have lost sleep worrying about money, all of which impact productivity (CIPD, 2021).
There are 7 stages of financial wellbeing:-
- Chaos – This stage is clouded with emotions like fear, guilt and shame around money and can lead to overspending or conflicts around money and spending.
- Avoidance – People experiencing financial avoidance might actively shy away from managing their finances which may mean not paying bills or checking financial statements so as not to experience emotional distress.
- Awareness – People at this stage start to make changes with their relationship with money and start thinking more proactively about finances and their future. They improve their financial literacy and where possible engage with a professional to help gain knowledge and skills to build more awareness about financial plans.
- Stability – People at this stage have stable income, are managing debt and starting to think seriously about investments and long-term savings.
- Security – People at this stage feel more confident in their choices as they have more knowledge of how to manage their finances. With this knowledge, they can plan for unexpected life events and move towards financial independence.
- Freedom – People will have enough savings and investments to support their lifestyle without worrying about running out of money. It’s about having the freedom to make choices that bring a person joy and fulfilment.
- Fulfilment – People at this stage have achieved full financial independence and maintain financial stability.
Organisations can support their employee’s financial wellbeing in a variety of ways.
Fundamentally, financial wellbeing needs to be included in the organisational health and wellbeing agenda. As Jason Butler, Head of Financial Education, said, “An organisation that has a mental wellbeing strategy without a financial one alongside it, is potentially driving along with the foot on the accelerator and the brake pedal simultaneously.”
It is recommended that practical support is offered to employees on financial wellbeing through:-
- links to debt management,
- access to expert financial advice,
- courses on financial literacy,
- if possible, offering small loans which are repayable via salary deductions,
- considering cost of living increases,
- reviewing employee benefits, e.g. pensions, subsidised lunches, gym memberships.
The Employee Assistance Programme (EAP) needs to include financial wellbeing support to all.
Financial wellbeing is about people feeling confident and secure about money and finances. It is an important aspect of a person’s overall health and wellbeing.
What stage of financial wellbeing are you in and what are you doing to improve your financial wellbeing?
Jolene King is Principal Consultant of 246 King Consulting. She is an Occupational Psychologist, experienced Human Resources professional, qualified Mental Health First Aider, mental health advocate and is trained in mental health conditions and exercise, health and nutrition. She can be reached at jking@246king.com.