Saving taxes, becoming rich, and having whatever one wants is how most people describe financial well-being. This is likely why many organisations focus on sessions about tax planning and investing. But is financial well-being just about saving taxes and quick money-making?
Financial well-being means being financially secure and in control of one’s finances. It is essentially about having enough money for current and future expenses and financial goals, allowing one to live life on their terms. With financial well-being, individuals gain power over the most significant asset in their lifetime – which can lead to a more balanced and fulfilling life.
Being less stressed about money has positive effects on overall mental and physical health, relationships, sleep, and much more. It can be the elixir of a good life.
For organisations, fostering financial wellness can lead to a healthier workplace and a more productive, positive working environment. When financial wellness is prioritised, it can reduce absenteeism, boost morale, improve loyalty, and lower attrition.
To achieve financial well-being, individuals need a sound plan that gives them the liberty to make choices on how to utilise their money and the ability to absorb financial shocks. This means working on long-term financial plans and addressing all aspects of one’s financial life, including contingency planning, insurance, borrowings, investments, and estate planning.
Thus, simply providing tax planning and investing sessions is not enough to improve employee financial health. The experience during COVID-19 also showed that managing emergencies and loans are areas where employees need more knowledge. This has become even more crucial in light of increased job insecurity and an uncertain global environment.
Key areas for employers to focus on in financial well-being:
Relevant financial education – Given that financial literacy is not typically taught in schools or colleges, and that money matters are rarely discussed at home, it is essential to provide employees with the right knowledge and resources on money management. With the information overload on the web and misleading advice from influencers, employees need access to reliable information.
Saving well and managing loans – Household debt as a percentage of personal disposable income has risen from 32% in 2011 to 52% in 2023, with unsecured loans growing at an average rate of 33% per year. Young salaried employees are the primary target for banks, and recent studies show they have higher approval rates for loans. With lifestyle inflation high among young people and easy access to loans, organisations should promote good saving practices for their employees’ well-being.
Planning for immediate and long-term goals – With stock markets booming over the past four years, many investors, especially new ones, are inclined to take high risks for quick returns. Futures & Options (F&O), day trading, and investment apps promising high returns are popular among employees, but reports from SEBI show that over 70% of individual traders incur losses. Besides the Employee Provident Fund, individuals are not planning long-term retirement or other family goals. Even benefits like the National Pension Scheme (NPS) have low uptake due to this intense focus on the present. Helping employees to think, plan, and save for significant life events can foster a positive company culture.
For employees to be at their best at work and in life, they need to be financially resilient, confident, and empowered. Employer-led financial well-being programmes can provide the impetus.