Are Your Employees ‘Financially Courageous?’

In the 1939 movie, “The Wizard of Oz,” the Cowardly Lion is known for his lack of courage. Oddly enough, when it comes to making the best use of employer-sponsored financial wellness initiatives, today’s workforce may have something in common with the classically fearful character.

So says a newly minted 2017 study of 3,000 employees by global consulting firm Mercer. It finds that building what’s dubbed “financial courage”—not financial literacy—may actually be the true catalyst to improving the success of financial wellness programs.

The difference boils down in large part to perception. Mercer’s research contends that employees’ personal views of their own financial knowledge are likely more important than their actual levels of financial literacy in achieving financial wellness. With that fact as a backdrop, tools and strategies that focus on building up financial courage in the first place—namely, an employee’s confidence in his or her own ability to engage in financial transactions—will be vital for employers.

“Financial courage is key. If they don’t have it, our research shows that employees are much less likely to use financial wellness tools given to them by their employers,” says Betsy Dill, Mercer’s U.S. financial wellness leader. “So it’s a barrier to even getting started.”

Addressing the Worry Factors

It’s no secret, of course, that interest in offering a financial component within overall wellbeing programs has swelled in recent years. Some recent measures even suggest that nearly three of every four companies now offer some form of the benefit. In particular, the Society for Human Resource Management’s 2016 Employee Benefits Survey report found that 24% of organizations offer employees online financial/investment advice; 27% offer one-on-one advice; and 22% sponsor group or classroom financial advice.

The rush to add financial wellness to the benefits mix has its roots in real concerns over what many employers have found to be a clear connection between financial well-being and the resources they’re devoting to proactively improve employee health and wellness. Indications are that not only can a lack of financial wellness impact healthcare costs but it can also negatively affect productivity and increase absenteeism.

In trying to come up with a more straightforward measure of those bottom-line issues, Mercer took a practical look at the number of hours employees spend worrying about money at work. Turns out, people spend on average 13 hours a month worrying about financial matters while on the job, the data show. The data also found that financial concerns aren’t consistent for any one group based on gender, age, or income level.

Building Confidence

What issues are workers most stressed about? In general, many experts look to the U.S. Consumer Financial Protection Bureau (CFPB), which addressed the issue in its paper Financial Wellness at Work. The CFPB defines financial wellness as a state where a person:

  • Has control over day-to-day/month-to-month finances;
  • Has the capacity to absorb a financial shock;
  • Is on track to meet financial goals (such as the ability to retire when he or she chooses); and
  • Has the financial freedom to make choices that allow him or her to enjoy life.

When employees aren’t confident in their finances, they tend to default to employer provisions, which work on average, but might not be right for everybody. Furthermore, a lack of confidence also often brings inertia, with staffers failing to take even the easiest, simplest actions that could help improve their financial situation. These folks also may avoid financial discussions altogether—and especially group discussions—because they’re beyond their comfort zone.

Within the Mercer study, for example, employees with strong financial courage are far more likely to take advantage of the financial wellness support their companies offer – seeking out guidance in improving their financial picture and getting answers to what they don’t know or haven’t mastered. The takeaway: Confidence, rather than just financial acumen alone, likely has a lot more bearing on a worker’s ability to improve his own financial situation, says Dill.

In tomorrow’s Advisor, four considerations for building more courage into your company’s financial wellbeing plan.