Employee financial wellness programs show life-changing results

Employers are realizing that financially well employees are healthier and more productive, miss less work and experience higher job satisfaction.

Financially well employees should have minimal financial stress, overall financial stability and the ability to retire on time.  

Providing employees with customized financial wellness tools and information can lead to these life-changing results:

1. Increased credit scores

Financial Wellness Behavior Change Data: A 12-Month Study found that credit scores increased an average of 25.51 points for our financial wellness users after 15 months.

Having a strong credit score is important when purchasing a home or other big-ticket items. According to data found on the BankRate Mortgage Calculator at the time of this article, there were no available home loans for those with a credit score of less than 620. 

Interest rates are lower for those with higher credit scores. Someone with a credit score of 657 could get a 30-year fixed-rate mortgage at 3.48 percent. For a $270,000 loan, your employee would pay $435,387 over the course of the loan. However, if this employee had increased their credit score by 25 points, they could get the same loan at 2.87 percent, saving over $32,000.

More importantly, higher credit scores have also been linked to better wellbeing, as shown in a study by Harvard Business School.

The Harvard study stated that “credit scores predicted life satisfaction even after controlling for a range of financial covariates, including income, spending, savings, debt, and home-ownership. Respondents with higher credit scores felt more optimistic about their future, promoting happiness. Further, the relationship between credit scores and wellbeing was moderated by participants’ prior awareness of their score. Together, these results suggest that creditworthiness can plausibly increase well-being, either directly or indirectly, meaning that interventions to improve creditworthiness could improve consumer welfare.”

2. Higher job satisfaction

A 2019 MetLife report, Financial Wellness Programs Foster a Thriving Workforce, found that a majority of employees believe their employer has a responsibility to help them achieve financial wellbeing. The report also found that employees who are on track with their financial goals are more engaged and satisfied with their jobs, more committed to their employer’s goals and more productive.

The MetLife study found that employees who were financially on track were more likely to be with the company a year later than employees who were not. The PwC 2021 Employee Financial Wellness Survey found that nearly three out of four employees with increased financial stress due to the pandemic would consider taking a job with a company that cared about their financial wellbeing. The same PwC survey found that employees use and appreciate financial wellness programs when offered. Of those with access to financial wellness programs, 88 percent participated in the program. 

More satisfied employees mean higher retention, which is important to the company bottom line. The costs associated with employee turnover are significant. The Society for Human Resource Management states that turnover costs equal six to nine months of the replaced employee’s salary, with that number being even higher for executives. 

3. Increased retirement savings

The Financial Wellness Behavior Change Study found that in a one-year period, 15 percent more employees began participating in the company’s 401k plan and 10 percent more began to participate at the level required to receive the company match. 

Increasing retirement savings is critical for both employees and employers. According to the Magnify Money 2021 Retirement Statistics Guide.

• The average US household has just over $255,000 in their retirement accounts, which is not enough money to pay for health-care expenses during retirement
• 49 percent of American households do not have any type of retirement account
• Nearly one third of Americans with a retirement account withdrew money from the account due to COVID, and almost half have stopped over lowered their contributions
• 74 percent of employees plan to keep working after retirement age

The 2019 Cost of Delayed Retirements study by Prudential found that when employees delay retirement, employers experience increased costs and lower productivity. Prudential quantified the cost at $50,000 per employee per year for a one-year retirement delay, and even higher costs for delays beyond two years.

4. Decreased financial stress

Employees are looking for ways to reduce financial stress levels, especially since the onset of COVID-19. Data from Enrich found that after one year, the average financial stress level of participants decreased by 23 percent.

PwC’s 9th Annual Employee Financial Wellness Survey (2020) found that the top cause of stress for employees is financial matters, which was higher than all other stressors combined. Unfortunately for organizations, half of employees who suffer from financial stress have been distracted by their finances at work compared to just 12 percent of those not suffering from financial stress. That’s why reducing employee financial stress is imperative for employers.

5. Improved health

The National Institutes of Health has found a direct link between financial stress and wellbeing. In addition to causing depression and anxiety, financial stress can cause, or worsen, the following conditions:

• Heart disease
• Stomach issues
• Eating disorders including weight loss or gain
• Diabetes
• Cancer
• High blood pressure
• Insomnia
• Psoriasis
• Substance abuse

As you help employees decrease their financial stress, you also help them increase their physical wellness–which in turn decreases health care costs.

6. Increased emergency savings

A recent study by Bankrate found that 61 percent of Americans could not pay for a $1,000 emergency expense. However, the Financial Wellness Behavior Change Data shows that of participants using the Enrich Financial Wellness program, 27 percent built up an emergency savings fund. 

The study also found that on a five-point scale, having an emergency fund dropped financial stress by about one point.  Since reducing financial stress increases everything from engagement and loyalty to productivity and job satisfaction, offering an employee financial wellness program is a smart financial decision for any company.

7. Improved debt management

A U.S. Federal Reserve report shows that three out of four American households have some kind of debt, and the Federal Reserve Bank of New York Household Debt and Credit Report (Q2, 2021) shows that household debt has reached $14.96 trillion. Of that, $4.19 trillion is in non-housing debt such as automobiles, credit cards and student loans.

However, Enrich found that participants using their financial wellness program managed their debt better. The data shows that:

• 28 percent more pay off their credit card each month
• Average number of checking account overdrafts per month decreased by 40.7 percent 
• 32 percent more on track with their financial goals

8. Increased awareness of other employee benefits

Forty-three percent of employers don’t believe their workforce knows about or understands all the benefits offered to them, according to an October 2020 report by Group Risk Development. With companies investing a large amount of time, energy and money into these benefit packages, effectively communicating the availability and value of these benefits is important.

Kris Alban is executive vice president at Enrich Financial Wellness.