Advice

Understanding financial wellbeing and building a strategy

22 May 2019 By Advertising feature

Learn how to provide your employees with a foundation for better money management

Salary Finance’s financial wellbeing research found that money worries have a negative impact on areas that are top priorities for most HR teams: productivity, retention, absenteeism and employee mental health.

Those with money worries are:

  • 7.6 times more likely to not finish daily tasks

  • 2.2 times more likely to be looking for another job

  • Taking 1.5 sick days a year due to financial stress

  • 3.8 times more likely to have anxiety and panic attacks 

  • 4.9 times more likely to suffer from depression


Frightened of finance

We found that there are a large number of potential sources of financial stress. Our survey showed that one of the most common reasons people aren’t actively improving their financial literacy is because they find finances to be a scary topic. For some, simply budgeting throughout the month can be a challenge. We found that 34 per cent of people regularly run out of money before payday and this is strongly correlated to money worries. 

One of the main reasons for financial stress is a sense of not being in control. This was true across all salary bands. Higher levels of pay did not protect people from financial stress: 

IncomeRegularly run out of moneyWorried about money
<£15,00043 per cent49 per cent
£15,001-£25,00038 per cent43 per cent
£25,001-£40,00032 per cent37 per cent
£40,001-£60,00029 per cent36 per cent
>£60,00133 per cent38 per cent

Measure financial wellbeing and creating a benchmark

At Salary Finance we use a Financial Fitness Score,  from 1 (not in control) to 5 (financial freedom), as a measure of financial wellbeing. The score is based on 10 questions about saving, borrowing and spending habits.

Although salary is a factor, we discovered that it isn’t as simple as more money equalling a higher score, and better financial wellbeing. Almost a third of people getting a higher Financial Fitness Score earn less than £25k pa and 25 per cent of the people getting lower scores earn more than £40k pa.

The average Financial Fitness Score for the UK is 3.1. However, only 17 per cent of people have a score of 3. Instead, there are large spikes at 2 (31 per cent, no freedom to enjoy) and 4 (41 per cent, plan in place). 

This is an extremely important insight to keep in mind when creating your financial wellbeing strategy. The groups of people who score 2 or 4 have very different attitudes and behaviours when it comes to money. It is this difference in the way they think and their habits that is the strongest influence over their financial wellbeing. 

For example, the correlation between regularly running out of money before payday and money worries is even more evident when viewed through the lens of the Financial Fitness Score. 

Financial Fitness ScoreRegularly run out of moneyWorried about money
197 per cent82 per cent
271 per cent69 per cent
310 per cent29 per cent
410 per cent22 per cent
50 per cent8 per cent

The implications for your financial wellbeing strategy

For a financial wellbeing strategy to be most effective it needs to help those that are struggling with the highest levels of financial stress. On average 36 per cent of people working at a company are likely to score 1 or 2. It is this group who are experiencing the biggest problems as a result of their low financial fitness.

We recommend that everyone involved in developing your wellbeing strategy understands the Financial Fitness Score and uses our calculator to find out their own score. Someone who scores 4 or 5 will think and act differently to those scoring 1 or 2 and will also value a very different set of financial wellbeing benefits. Understanding where you are in relation to others can bring hugely important context when developing the strategy. 

With this understanding, you can then make sure you include employee benefits that help those with lower financial wellbeing in your strategy.

Find out more about how to build a financial wellbeing strategy that can provide your employees with a foundation for improved money management and financial wellbeing on the Salary Finance website.

HR Director

HR Director

Based West Midlands or possibly West Yorkshire

£80k to £90k pa plus car, bonus and benefits

Evans Taylor

HR Manager - part time 3 Days per week

HR Manager - part time 3 Days per week

Bristol, England

full range of benefits

Hays

Interim Workforce Strategy Lead

Interim Workforce Strategy Lead

South Yorkshire, England

£63000 - £70000 per annum

Michael Page Human Resources

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