Why courage is key to financial wellness success

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Financial wellness programs often come to mind when thinking about improving workers’ money situations. But global consulting firm Mercer says to truly achieve financial well-being, employees first need to find financial courage.

“When you think about it, the whole concept is rather intuitive,” says Betsy Dill, senior partner for Mercer. “Think about the dentist. If you don’t have the courage or confidence to go to the dentist, you will have bad teeth. You won’t get the dental care you need. You have to get over that fear to take that next step. … You need the confidence that you can go to the dentist and it will lead to better oral health.”

The same can be said of a person’s finances.

“Money is complicated. People are scared. They are concerned about what they don’t know,” Dill says, adding that if they can’t get over that fear, they won’t do anything.

It isn’t just workers who don’t know anything about finances that are scared of making financial decisions. People with high financial literacy also have low courage when it comes to making big decisions, Mercer finds.

“What we saw in our research is that people with low courage are less likely to engage with the tools and resources employers put in front of them,” Dill says. “They are less likely to engage with a provider or an expert, so it was a barrier to even getting started.”

That’s why employers have to start out small and help create small wins to build up employee confidence in their own abilities.

With employer-sponsored retirement plans, Mercer believes there is an opportunity for employers to help employees build a habit of engaging with their finances. It then empowers them to take the next step, she adds.

Mercer launched two new indices to help employers gauge where their employees are at when it comes to financial wellness and financial courage. They were created in response to Mercer’s “Inside Employees’ Minds Financial Wellness” survey, which found that financial knowledge and literacy is not as important as first thought.

According to Mercer, helping individuals become more confident about engaging in financial matters — improving their financial courage — is more critical than employers providing benefits that focus solely on financial education.

“We want to help employers understand what benefits they can provide that can enhance their employees’ personal financial wellness,” Dill says. “When employers understand their employees’ financial wellness issues, the better they can help them with relevant offerings. Increased financial wellness improves employees’ stress levels, which in turn can have positive impact on productivity.”

Mercer’s research found that 16% of employees spend 20 hours per month or more worrying about money at work. The average was 13 hours and the median was 5 hours. It also found that financial concerns are not consistent for any one group based on gender, age, income level or other factors.

Mercer’s Financial Wellness Index and Mercer’s Financial Courage Index can be used by employers to assess their employee’s current state of financial wellness and courage. The data can be used to identify sub-groups or clusters within their organization, which in turn can help them to better assess how a financial wellness program should be directed within their organization for maximum positive impact.

Many employers focus strictly on financial education, but the challenge with that is employers are not seeing how financial literacy correlates to a person’s financial wellness, Dill says.

“If people don’t have courage, they are not going to engage with the education anyway,” Dill says, adding that many employers spend a lot of money on benefits and they want to make sure that employees are benefiting from what is being offered. Mercer’s surveys give employers a better handle on what types of information their employees need and how they can begin addressing the problem. It may even mean rethinking their retirement plan design.

By adding defaults into the plan, like automatic features, an employer can help create the wins and “overcome the psychological problems that get in the way of people being successful,” Dill says.

There has been a lot of interest in financial wellness the past few years, but many employers have struggled with the return on investment of doing something. It doesn’t cost much to administer a survey, which can direct how a company spends its benefits money, experts say. Some employees are concerned about paying off student loans or saving for their kids to attend college. Others don’t know how to budget their money to take care of day-to-day expenses.

“We’ve been trying to address financial decision making in a rational way, [but] people are not rational when it comes to money,” she says. “Not to say that education isn’t important, because clearly we have real issues in terms of people’s financial literacy, not just in the U.S. It’s not good. In terms of moving the needle for folks in the workforce, I think understanding what some of the psychological issues are with respect to money, courage and thinking about how employers can help employees build courage and take steps becomes crucial to ensuring [employers] are helping people.”

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