Gallup’s research into wellbeing found that “a life well-lived” — the underlying concept of wellbeing — requires the fulfillment of five elements: Career, Social, Physical, Community and Financial wellbeing. A person’s experience of wellbeing — whether thriving, struggling or suffering — affects every aspect of their life. Including their experience of their job.
Leaders can have a big influence on improving individual wellbeing and shouldn’t pass up that opportunity — employees who thrive in all five elements miss less work, have higher customer ratings, solve problems quicker, and adapt to change better, all while saving companies money in healthcare costs and turnover.
Investing in Employees’ Financial Health
Though most leaders are familiar with physical wellbeing programs, many are adopting employee financial wellbeing initiatives as well: A 2017 Alight Solutions survey found that about a quarter of all companies have or are building financial wellness programs and 75% of companies with more than 10,000 employees have one in place, according to the Employee Benefits Research Institute.
These programs are a great idea. Employees want this kind of outreach, and people need to know their company cares about them — it’s a precondition for employee engagement, and a financial wellbeing program demonstrates that caring concretely.
It’s also a smart way to improve performance. Workers with thriving financial wellbeing are more likely to be:
Less stressed: Almost a quarter, 22%, of adults experience extreme financial stress, as reported by the American Psychological Association in 2015. These workers don’t leave their worry at home, and it’s nearly impossible to be a focused and engaged employee when your next paycheck is spent before payday and debt is piling up.
More innovative: Financial insecurity inhibits risk-taking — if you’re worried about losing your income, you don’t make waves — but the financially secure feel safer offering honest opinions and innovative ideas.
Harder to poach: A Gartner study found that, on average, people increase their pay by 15% when they take a new job. But Gallup finds that wellbeing and engagement reinforce each other — and that it takes a 20% pay jump to lure the engaged away.
Help Your Employees Build Wealth and Wellbeing
There are a lot of financial wellbeing programs that companies can implement — the best of them center on the tried-and-true basics of wealth building. So, whether you’re buying a program or designing your own, make sure it focuses on the following five actions:
- Create a spending plan. A formal budget with a name and purpose helps people see where their money goes, which can be a mystery if you’re not monitoring it. A spending plan provides oversight, which helps people make good choices in the moment.
- Design a debt management plan. Reducing and/or eliminating consumer debt (essentially all non-mortgage debt) as fast as possible is key to financial stability.
- Plan ahead with a “Fortress Balance Sheet.” Everyone needs to save enough to cover minor emergencies, but real financial security requires savings of three months (for individuals) to six months (for families) of expenses, not income. The two are often confused, but the “Fortress Balance Sheet,” as our former Chief Economist Dennis Jacobe called it, is calculated on spending, not earnings. That makes building a Fortress Balance Sheet to avoid debt following a job loss feel a lot more achievable.
- Save for the long term. As a general rule, it’s recommended that employees dedicate 15% of gross income to a retirement fund or funds like a 401(k), 403(b), IRA, etc. The exact amount depends on the person, but the sooner an employee begins saving, the better.
- Give back. Every little bit of charitable giving matters to the recipient, of course, but it has a big effect on employees too. Gallup research shows that supporting the things that are important to us significantly impacts our sense of wellbeing.
Those steps help people build wealth slowly, which is really the only way to build wealth. In fact, 88% of millionaires are self-made — they didn’t inherit the wealth, it accumulated over time. If your employees stick to these steps, they’ll achieve financial security, and that’s the foundation of financial wellbeing.