The 5As of employee financial wellbeing
It is becoming increasingly clear that there is a dire need to improve the UK’s overall financial awareness and understanding. Research from Neyber and the Social Market Foundation in January 2016 (‘Working Well’) highlighted that one in 12 employees are finding things financially difficult and 13% report that money worries have affected their ability to concentrate at work. Even in the financial services industry, 16% of workers do not have any savings.
Ideally, financial education should sit on the curriculum at schools. However, until that becomes a reality, we have to accept that new employees, graduates and apprentices will often arrive in the workplace with a number of common traits:
- varying levels of debt, many not quite managing it effectively (or at all!)
- a poor level of personal savings, with little or no emergency cash buffer
- no real understanding of why they should save into a pension plan
- no plan in terms of their future housing ambitions
Of course, these issues are not limited to people who have just started their working life; they can apply to anyone of any age. What this means for employers is they potentially have a large proportion of their workforce feeling under pressure, losing sleep and unable to concentrate because of money worries.
There is no ‘magic wand’ that can instantly solve this problem, but gaining even a basic understanding of good financial planning practice can quickly make a big difference to people’s lives.
That’s where the 5As come in – an easy to remember approach for any employee:
- Accounts – Budgeting might not be the most exciting topic, but it is the crucial first step in effectively managing one’s money. Do the basic maths to understand how much cash comes in and how much goes out. This needs an honest inclusion of both fixed and variable amounts. Best practice dictates that the optimum would be to spend a brutal month of record keeping to ensure everything is included. However, such a task is likely to be unappealing to many people. Even spending an hour or so noting all incomings and outgoings can provide a good basis to start from.
- Ambitions – Set some short, medium and long-term financial goals. Write them down and discuss them with a friend, partner or family member. Review them when your circumstances change and adapt them as appropriate. Once you know what you’re aiming for, managing your money seems much more meaningful.
- Action – Having set some financial goals, we need to work towards meeting them. Talk is easy. Action is always harder because it involves doing something. Whether this means working more hours, cutting costs, being more money-efficient or adapting new habits, there is always scope to make changes and improve our financial wellbeing.
- Advice – At some point, we are all likely to need some advice on the best course of action to meet our financial goals. This doesn’t need to mean paying loads of fees that we can’t afford. Online financial planning tools provide a great starting point and employers are increasingly incorporating financial education into their wellbeing strategy. Where full advice is needed, UK financial planners must now hold higher levels of qualifications and meet more exacting professional standards than ever before.
- Attitude to risk – Everyone’s attitude to risk is different. Yet most people sit in a mid-risk profile for all savings over all timelines. Wisdom suggests this may not be entirely sensible. The advice and guidance process needs to allow an employee to assess how much they are prepared to see the value of their savings go down as well as up. It also needs to ensure employees understand the risks involved in ‘no risk’. Even for those with a very cautious outlook, holding money in cash with zero, or close to zero, returns for anything other than very short-term needs, is unlikely to be beneficial.
Go to our News page to watch the 5 As video
These five simple steps can provide every employee with an effective framework to take more control of their money. Feeling financially secure is something that benefits everyone. Helping employees achieve that sense of financial wellbeing can only mean great things for employers.