How to Help Employees Manage Personal Financial Stress

You might be wondering why we are publishing yet another financial blog since we’ve all been taught that it’s not polite to talk about money. How much someone earns, saves, or doesn’t save isn’t any of our business. Except that it is, if you own or manage a business.

The number one cause of stress for employees is financial. Since the pandemic, more and more companies have become aware of the link between poor financial health and employee wellness. However, many firms are only concentrating their efforts on lower income earners within their organization and at times actively discriminating against the higher income earners in the mistaken (and common belief) that the more one earns, the better off one is financially. Unfortunately, this isn’t true. Even those earning six figures per year can struggle. A recent study in the US found that approximately 36% of employees earning $100,000 or more are living paycheque to paycheque.

One of the reasons high income earners struggle is related to large debt loads.  Professionals such as doctors, lawyers, architects, and engineers have spent many years earning their designations, amassing significant debt in the process. A 2021 American Bar Association (ABA) study of 1300 members under age 36 found that 90% of respondents borrowed to fund their education. About two-thirds of all respondents reported high or overwhelming stress over finances in general. 

But it's not just young attorneys who struggle. A survey sponsored by AARP found that 31% of baby boomers and 38% of GenXers said student loan debts stopped them from saving for retirement. The result, regardless of whether the source of stress is debt or lack of retirement savings, is sleepless nights, lack of focus, presenteeism, absenteeism, and increased health plan costs. So, what is a business to do?

Identify the Needs of Your People 

The demographics of your organization will provide a solid starting place. If a large percentage of your employee population is young recent university grads then chances are good that their primary concerns will center on debt reduction, budgeting, and establishing their first savings plans. Conversely, if a large part of your population is in their late forties or early fifties, the focus will likely be on paying off the mortgage and preparing for retirement. However, demographics only tell part of the story. Anonymous employee surveys, best designed with the help of a benefits advisor, can identify people’s top priorities and help you to formulate the next steps.

Educate Your Employees

Once you have an understanding of the key concerns, the next step is to identify available resources to help educate your employees. While there is a plethora of websites providing financial advice, digital tools tend to take a back seat to speaking with someone in real time, at least initially.  

While the best source of financial advice is a qualified professional who can draw up a personalized financial plan for each employee, this may not be practical or within the budget. However, many benefits and financial advisors are happy to provide information on debt reduction, budgeting, financial planning basics, and investing basics in a webinar or seminar format so that  your people can ask questions relevant to them. At Montridge, we find that after providing a live session or two, employees are more likely to access online tools and further their own education.

Another, often overlooked source, of advice is your company’s Employee Assistance Program (EAP). While an EAP is primarily viewed as a crisis management tool especially for mental health concerns, most plans — whether offered separately or as part of an insurance company’s extended health benefits — include financial planning resources and assistance. Consider creating, or asking your advisor to help create, an employee communication piece identifying the financial wellness features of your firm’s EAP plan.

A Look Beyond Group RRSP Plans 

The initial step taken by many employers as they venture into the financial wellness arena, is the implementation of a Group Retirement Plan. More often than not that plan is a Group Registered Retirement Savings Plan (GRRSP).  This is indeed a valuable and progressive first step as only approximately 21% of small to mid-sized employers offer any form of retirement plan. However, a GRRSP is less tax efficient than some of the other structures available. As well, your people may have more pressing needs and it is worthwhile to consider adding other savings options to the retirement plan.  

Consideration should be given to enhancing benefit programs to include help with  general debt, student loans, and building short and mid-term savings. Consider investigating more comprehensive software tools that utilize artificial intelligence to provide targeted education and personalized learning.

Finally, don’t forget about those high income earners. They need financial education too!  As well, it's important that any employee sponsored plans take into account the relatively low limits allowed under Canadian retirement savings regulations. Anyone earning more than approximately $160,000 per year (2022) will maximize their RRSP or pension contributions. For high income professionals or executives, savings and retirement programs may need to be layered in order to help those earning more to save in the same proportion as other employees. 

Conclusion: Reduce Employee Financial Stress and Boost Your Bottom Line

To conclude, reducing employee financial stress has many benefits to both the employee and your organization. By identifying the needs of your employees and educating them on personal financial wellness, you are empowering your employees to take action and learn. Remember, happy employees are more likely to produce a higher quality of work. With the number one cause of employee stress being financial, you will see a large boost in employee happiness and productivity. 

Want to learn more about employee financial wellness? Sign up for our employee financial wellness webinar here.