Employee Stress & Risk

The Three Pillars of Financial Wellness

How helping employees get financially well is good for all of us

by Vishal Jain

Mr. Jain is vice president of strategy and wellness for Prudential Life Insurance Company. He leads the group’s financial wellness initiative, which includes teaming with partners across Prudential to define, develop, and deliver a market-leading institutional financial wellness value proposition. Visit prudential.com

 Employees are financially stressed. Many individuals face significant challenges today, including paying day-to-day bills and addressing longer-term needs. Forty-four percent of employees worry about their finances while at work and 46 percent say they spend two to three hours of their employer’s time each week trying to handle personal financial matters, according to Prudential research from 2016 titled “How Well Protected Are Employees Against Key Financial Risks?

When employees stop worrying about money, they are less stressed and less distracted on the job, more engaged and more productive throughout the arc of their careers. Building this kind of financial wellness creates a phenomenon that Prudential terms “The Wellness EffectTM.” There is a positive ripple that occurs in companies, communities and families when employees have confidence that they are in control of their money.

The three pillars of financial wellness

Prudential, using research and drawing upon its experience in providing financial wellness products, determined that three pillars form the foundation for financial security: day-to-day money management; achieving important financial goals; and protecting against key financial risks. While that seems a simple solution, achieving those goals becomes difficult – people have varying levels of financial awareness and ingrained behavior can run against sound advice. Many procrastinate planning for the future; some are too optimistic about avoiding financial emergencies; and many of us want things now, which can affect the financial future.

Additionally, an overwhelming amount of information available about money management can serve to paralyze rather than motivate an individual. This is where employer-sponsored financial wellness programs can provide a valuable resource that streamlines content and guides employees through information in a beneficial way. The net effect is that these financial wellness programs can improve workers’ financial security, which can affect everything from health to job performance. A 2016 study by GuideSpark called Financial Wellness Research showed that 81 percent of employees feel that a financial wellness program would reduce stress, and 76 percent said that it would help them appreciate their company more.

Employers can implement financial wellness programs that help people by:

  • Including tools to help workers plan effective budgets that reduce debt, make room for emergency preparedness and help them save for on-time retirement. Workers get peace of mind as they work toward achieving financial goals.
  • Helping workers stop procrastinating saving for retirement – a critical task since it only becomes more difficult with time.
  • Helping people prepare for financial emergencies, such as a sudden loss of income, unexpected health costs and a host of other calamities.

While some financial wellness programs offer a specific set of solutions, the ones that truly work are holistic, addressing the three pillars of financial wellness; focusing on engagement to ensure employee adoption and impact; and are tightly connected to existing benefits offerings, which can help employees address key protection, retirement and other needs.

Financial wellness programs are similar to physical wellness plans

There is a positive ripple that occurs in companies, communities and families when employees have confidence that they are in control of their money

Benefits programs from employers have long helped employees prepare for retirement and be ready for some emergencies. As the job market evolved, so did the challenges. For their employees’ retirement solution, employers have moved away from defined benefits plans to defined contribution plans. As healthcare insurance costs skyrocketed, employers shifted more of those costs to employees. Still faced with a desire to provide attractive benefits and the need to keep costs under control, many firms have increased the use of voluntary benefits.

As benefits costs rose, employers found that providing health-and-wellness plans reduced insurance costs to both employees and employers. Employees were healthier, and employers benefited from workers who feel better and more productive. Now companies are seeing the same thing with financial wellness benefits. The approach helps employees feel confident about their finances and the employer by cutting the number of people tapping into their retirement accounts or delaying retirement.

A recent survey of financial executives showed 82 percent felt that their companies would benefit from a financial wellness program, and 78 percent said employers should help their employees achieve financial wellness during their working years. The 2016 study, called “The Value of Employees’ Financial Wellness,” was done by CFO research and sponsored by Prudential. Successful financial wellness programs can help companies achieve strategic goals, including increasing productivity, optimizing the investment in benefits programs by tailoring them specifically to their workforces and managing benefits costs.

Benefits providers can serve as a trusted resource for employers on financial wellness. Benefits providers already engage millions of Americans every day on key financial issues and help employees make benefits decisions, like increasing 401(k) contribution rates or electing adequate life insurance coverage at work.

The range of financial solutions available in the workplace will expand to address new needs

Today, employers offer a wide range of retirement and group benefits to address key long-term savings and protection needs. In-person education and guidance are an important component of financial wellness programs. Prudential has had more than 200 institutions adopt its onsite education programs over the past few years.

Further, employers are increasingly evaluating solutions to address emerging needs. For example, companies have expressed a lot of interest in solutions that help employees manage student loan debt. As a result, Prudential’s retirement business is piloting that capability and has seen promising results in that programs have helped employees achieve meaningful monthly savings based on initial pilots.

Digital tools will play an increasingly important role in delivering financial wellness at the worksite. The key with online solutions is driving employee adoption to ensure digital capabilities truly affect individual behavior.

While financial wellness can be defined broadly, it varies by individual. It can mean peace of mind, freedom from debt and a comfortable retirement. It also varies by company. Each employer is unique and should design a program ideally suited to them, taking into consideration factors like if the company has a dispersed workforce. In the end, the best programs provide insights into the unique financial needs of each specific workforce, educate and engage workers, and help employees take concrete actions to improve their lives. And that benefits us all.

 

 

 

 

Group Insurance coverages are issued by The Prudential Insurance Company of America, a Prudential Financial company, Newark, NJ.
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