More than half of UK adults (51%) say that the pandemic has made them more conscious of the need to save more, with over a quarter (26%) saying it has made them recognise that they do not have enough savings, according to a new survey of working adults by WEALTH at work.
With this in mind, WEALTH at work has prepared the following tips to help employees build their financial resilience.
1.) Understand the needs of employees
Employees are likely to have different financial priorities depending on their life stage. For some the priority may be saving for a deposit for a first home, whilst for others it might be saving for retirement, or for some it may be paying off debt. It’s important that employees put a plan in place on how to reach their goals and they may require support to do this. It therefore helps to segment the workforce and research what different groups of the employee population may want and need, so that support can be tailored to them.
2.) Provide support on the basics
Many people struggle to understand basic financial issues and helping employees become more familiar with them, is an important step. For example, employees could start by looking at where their money goes, everything from utility bills and insurance, to food shopping and going out. Really looking at what is spent can often highlight areas that could be cut back on. A great example of this is insurance and utility bills. It is extremely unlikely that someone would get a better quote by remaining with their current provider than from shopping around and using tools like comparison sites, but many neglect to do this.
3.) Promote the employee benefits package
Employees should be encouraged to investigate the range of workplace benefits that may be available and suitable for them. This could include workplace ISAs, save as you earn schemes, or matching pension contributions. Making sure benefits are relevant and well-explained can really help take up and improve personal money management.
4.) Help employees understand the difference between good & bad debt Another important principle for employees to understand is the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure that it’s a good deal. At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. Employees should realise that it should always be a priority to pay off bad debt. For example, according to MoneyHelper if someone was to borrow £2,000 on a 19% APR and only pay the minimum payment every month, it will take them 24 years and 2 months to repay it and they’ll pay back £4,731 in total. The total interest they would have to repay will be a shocking £2,731!
5.) Stress the importance of an emergency fund
In the last year, many people have realised too late the importance of having emergency savings. Ideally, employees should have 3-6 months’ of savings which can be accessed at short notice should they or another member of their household, face a fall in income due to redundancy, illness, or for any other expense e.g. replacing the boiler or expensive car repairs.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “Many employees don’t recognise the importance of financial resilience until something happens which highlights how vulnerable their finances are. Building a good financial wellbeing programme is vitally important to help employees take control of their finances and put themselves in a more secure position in the future.”
He adds; “Many employers now offer their staff financial education and guidance through workshops, digital tools and helplines to help them understand the key issues relevant to them. Topics can cover a range of financial matters such as debt & money management, managing savings, retirement and health & financial protection. In addition, many are also putting in place regulated financial advice services for those who need more support.”