Personal finance in the workplace

Educating employees has positive ROI for businesses: Expert

More than 60 per cent of Canadian employees are dissatisfied with their personal financial situation, according to a survey by Toronto-based Employee Financial Education Division (EFED), an employee financial education counselling company.

Employees struggling with financial difficulties don’t perform at peak levels, according to Frank Wiginton, CEO of EFED.

“Personal finances for the past 25 years and probably for a lot longer… has been the number one stress in people’s lives,” he says. “It really does impact nearly every aspect of our lives because it’s something that every single one of us has to deal with every single day.”

A company should be interested in delivering financial education to its employees because it’s a universal concern among employees, regardless of income level, Wiginton says.

A 2010 study by the Center for Health and Wellbeing at Princeton University in Princeton, N.J. determined that emotional well-being is low when the individual has a low income. The report, High Income Improves Evaluation of Life But Not Emotional Well-being, analyzed more than 450,000 responses to the Gallup-Healthways Well-being Index, a daily survey of 1,000 people in the United States. It showed emotional well-being does increase as salary increases, but individual’s issues remain the same when reaching a salary of US$75,000 and beyond.

EFED’s 2011 Financial Education in the Workplace Survey asked 608 working Canadians between the ages of 21 and 60 to report on their current financial state. It asked what they want in the future and 87 per cent of employees said they wanted more personal finance education — and they wanted it delivered by their employer.

“It suggests that there is a substantial demand from individuals… but they just aren’t going out and doing it on their own,” Wiginton says. “If it’s given to them as an option that’s just sitting right in front of their lap and all they have to do is walk into the board room next door and participate in a seminar… they’re more inclined to do it.”

The study also asked employers how they’d like to see financial education programs delivered.

“The number one time, obviously, was during work hours,” Wiginton says. “Number two was during their lunch hours and then number three was immediately following work. It just goes to show that the majority of people want to do this during work time.”

Employers should be interested in delivering financial education because it offers great return on investment, according to Asaf Shad, president and CEO at Acquaint Financial, a Brampton, Ont.-based financial education program for employees.

“Studies have shown at varying levels that financial stress promotes physical stress and mental stress,” Shad says. “If an employee is stressed financially… they’re not concentrating on their job, they’re less productive.”

Employers need to promote financial education as a component to their total compensation package, he says. Employers should explain to employees they are receiving free retirement planning based on individual assets or free assistance to manage long-term financial goals. As a result, employee participation will increase.

“I think that once they appreciate the benefit that’s being delivered to them, the money that (employers are) spending on that benefit doesn’t really change, but the perceived value of that changes and, by default, I think increases (the employer’s) return on investment,” he says.

Financial education programs should differ depending on a number of variables, Shad says.

“The type of program and the modality of the program varies greatly based on — not only industries but individual organizations within an industry,” he says. “For example, a program that we made for an auto manufacturer would be completely different than someone in the entertainment industry.”

Shad’s view is shared by Wiginton, who also believes there are ways of delivering education that doesn’t meet businesses objectives.

“One-off lunch and learns aren’t going to be effective whatsoever,” he says, adding specific topics are great, but not when delivered on an infrequent basis. “Having the pension provider comes in once a year… to talk about the pension and its value and how to contribute to the pension and how much you’re going to have in retirement is better than nothing — but it’s not much better.”

Companies need to identify what employees need, Shad says. Every company has a specific culture and employers can accommodate the needs of that culture.

“I think it’s important to take inventory of where they are now, keeping in mind their corporate culture and their mandate, then deliver a program that would be tailored for that specific organization,” he says.

Getting solid support from an organization’s executive is also important, says Wiginton. While the company delivering the financial education will do most of the work, there will still be administrative tasks required from the business.

“It has to be supported as an overall company initiative,” he says. “This is important because it gives the employees... that are going to be participating and setting up and delivering program, permission to set aside other business things to deal with this.”

Bringing in a third party to deliver the education will mitigate any liabilities, Wiginton says. “(Companies) really shouldn’t be providing any financial directives or advice because it does open them up to financial education and liabilities,” he says.

Financial education does have a cost, but it depends on what an organization delivers and the perspective the cost is looked at in, Shad says.

“Organizations always say, ‘Look, this is how much we can afford to spend on this directive,’” he says. “Based on that, it’s our job to come up with a solution that works best and fits within their budget.”

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