Low levels of financial capability adding 4% to UK firms’ payroll costs

With money worries being linked to poor mental health, strained personal and professional relationships and low levels of job satisfaction, there is an increasingly clear impact on the work place.  With 1 in 12 employees finding things difficult financially, and 4 in 10 reporting that this is causing them stress^[1], is it time for your firm to take an interest in your employees wellbeing?

So we need to improve financial capability, but what is it?

Much work has been done to determine what is meant by financial capability.^[2] At The Money Charity, we define it through four key areas: knowledge of about the financial world, the skills to be able to draw up plans and make reasoned choices, the attitude, desire and commitment to managing money well, and behaviour – bringing it all together and actively managing your money well on a day to day basis.

Over the last decade there has been a growing focus on financial capability across multiple sectors. The introduction of financial capability to the national curriculum in 2014 and the launch of an updated Finanacial Capability Strategy for the UK in 2015^[3] are positive steps. However, it is important that we take practical steps to raise the financial capability of the UK’s adult population.

What can employers do?

Recent research from the Social Market Foundation illustrates the long-held belief that not only is money a primary cause of poor mental wellbeing, it is also impacting on workplace productivity through contributing to absenteeism and presenteeism.

The Social Market Foundation research states money worries have caused 1 in 8 workers to have experienced difficulty concentrating at work, and 1 in 20 to have been absent from work.^[4] Research conducted by Barclays indicates that almost half of all stress-related absences from work are related to financial distress – an estimated five million working days a year.^[5]

So what can workplaces do about it?  Fortunately, the answer does not only lie in increasing wages; low levels of financial capability can affect anyone, regardless of income.^[6] The solution lies in helping employees “learn healthy financial behaviours and build financial resilience.”^[7] And that’s where we come in.

The Money Charity

At the UK’s national financial capability charity, we believe that everyone has the ability to get, and stay, on top of their money, and our training programme helps people do just that. As well as having a range of resources on our website, we also offer in-house, face to face financial capability training to help employees.

We look at the practical side of money, such as developing budgets and setting priorities, and help participants to explore their emotional relationship with money through a range of activities.

Our face to face delivery allows us to establish a safe environment which encourages participants to fully engage with a taboo subject, and is key helping people develop new attitudes and behaviours towards money.  Feedback from our workshops demonstrated that people felt increased confidence in managing their money, resulting in reduced overspending, saving more and worrying less.

Want to know what we’re talking about? Here are some of our top tips for you and your employees:

1. Make a plan
   Planning is key to getting, and staying, on top of your money.  Pull together all the information you can gather on your income and outgoings and use tools like our budget builder to help you make sense of your figures.  Is debt a concern for you?  Free, impartial advice is available to help you find a way out. Budgets can seem daunting, but are well worth the effort and mean you make the most of every penny you have.
2. Set Goals
   Is there something you’d like to do in the future that seems out of reach?  Maybe you’re thinking about further study, or taking a well-earned holiday? Whatever the occasion, setting goals can help keep you focused and motivated to keep to your budget. Add up all the costs involved and divide the total by how long you have to save the money to work out your monthly saving goal.  Look back at your budget – can you afford it?  If not, what are the alternatives?  Can you wait a bit longer to give you more time to save?  Can you cut costs?  Evaluate carefully the consequences of using credit to help you!
3. Putting it all into practice
   You’ve set your budget, you’ve figured out your goals, now it’s just a case of putting it all into practice.  Whilst financial products can seem confusing, they can be used to your advantage to help you manage your money better.  Different savings products can help you work towards your short, medium and long term goals; well-managed credit can help you make purchases that you otherwise could not afford; and splitting your money across different current accounts for ‘essential’ and ‘leisure’ spending could help you ensure you always meet your financial responsibilities and stay in the black.

We know you can’t wave a magic wand and increase your employees’ pay packet, but we can help you get the most out of your employees by helping them put their money worries behind them. Find out more by contacting Carrie@themoneycharity.org.uk, 0207 062 8932.

Written by Carrie Magee