How Financial Wellness Programs Can Benefit Employees and Employers

UPDATED: September 11, 2023
PUBLISHED: April 17, 2023
woman utilizing financial wellness program for employees

Gone are the days when new employees received a list of the company holidays during onboarding and a packet with information about how to sign up for health care and retirement benefits. Employers are now providing a broader suite of benefits and are increasingly recognizing the importance of financial wellness programs for employees.

Amid high inflation the need for such benefits has become even more apparent. Human resource leaders have observed cash-strapped employees reducing retirement contributions and talking about how money-related stress has negatively affected their work lives, according to a 2022 financial benefits study conducted by Morgan Stanley at Work. And 85% of these HR leaders reported that financial wellness benefits are more important than even a year ago, the study found.

In fact, 54% of employers currently offer financial wellness programs, based on responses to an annual survey conducted by the Employee Benefit Research Institute (EBRI). Such benefits can yield significant results. “Employees who maintained a budget experienced significantly lower levels of stress and distraction at work during the pandemic,” according to a survey by You Need a Budget (YNAB).

Because financial stress seeps into other aspects of an employee’s life—including their physical well-being and mental health—offering financial wellness programs isn’t just another fringe benefit, but it can meaningfully improve retention, productivity and loyalty, says Jesse Mecham, founder of YNAB. 

“A financially content, non-stressed employee stays at their employer longer,” he says. “We want them to be productive and happy and creative and we don’t want money stress to get in the way.” 

How financial wellness programs benefit employers

Employee retention is the No. 1 value proposition that Mecham touts when talking with company leaders about why focusing on the financial wellness of their workforce is important. In 2022, YNAB launched a financial wellness benefits package for employers that includes access to online classes, workshops and more. 

The biggest uptick in adoption of YNAB’s financial wellness benefits program is among smaller companies with 50 to 500 employees, Mecham says. As with benefits focused on mental health, interest in financial wellness has increased since the onset of the pandemic, he adds. “Employers just seem to be far more inclined to think about their employees more holistically.”

Employees are more productive at work.

Because a financially stressed employee is an unproductive employee, this can affect the bottom line for employers, Mecham notes. “There are a lot of hours spent every week by employees managing their financial stress, juggling bills, doing all kinds of things that don’t add value—and they’re doing it on the employer’s time,” he says. 

Some business owners who question the value of offering financial wellness programs may be more inclined to do so once they see the direct impact on the company—which includes workforce productivity, engagement and loyalty, adds Deniece Maston, an HR knowledge advisor with the Society for HR Management (SHRM-CP). “That’s really important in this day and age: How can we engage and retain employees in the workforce?,” she says.

Offering financial wellness programs can help retain employees.

Finding a balance between “the right” wages and “the right” benefits is difficult, especially for small employees, Maston says. But business owners must adapt because the landscape has changed significantly, even compared with five years ago, and benefits that focus on the holistic health of employees are becoming more and more common, she adds.

“Financial well-being programs are being added or improved to increase worker satisfaction and retention,” according to the EBRI study. And employers report that “financial (non-retirement) benefits” are more important than offerings such as “wellness benefits,” “education benefits,” “technology benefits” and “transportation benefits,” according to the findings of the 2022 employee benefits survey conducted by SHRM. However, they were rated as less important than offerings including “health-related benefits,” “retirement savings and planning benefits” and “leave benefits.”

“Employers who want to stand out from the competition should offer financial wellness benefits to keep employees interested,” Maston says. “People are looking for those types of benefits.”

How financial wellness programs benefit employees

One potential problem for companies is whether they know that there’s a need for benefits focusing on financial wellness in the first place. For example, they may see low attendance among employees in seminars focused on participation in the company 401(k) plan but they have no way of knowing that some employees aren’t attending because they’re grappling with other financial woes, like recently overdrafting an account, Mecham says.

“The message mismatch was what we noticed,“ he says, adding that YNAB’s program strives to teach employees to “love how they spend their money” and that yields tangible results. “They’re paying off debt, they’re putting money toward retirement—they’re doing all those things that the employers intended to have happen, but we’ve addressed the root issues first.” 

Employees are often grappling with a wide range of financial stresses, including recovering from a layoff, paying off high medical bills or credit card debt and grappling with student loans—but those stresses may not be known to their employers, Maston says. Companies can gauge employees’ interest in financial wellness programs by conducting anonymous surveys, she adds.

What’s more, because people often experience some shame around some of their financial challenges, employees can participate in YNAB courses anonymously. “We’re really going after behavior change,” Mecham says.

Find a program that caters to various life stages

While YNAB has courses relevant to people of all ages, ranging from recent college graduates to impending retirees, Mecham says the heaviest participation is among employees in the age range of 32 to 48. More than age, he adds, the programs are meant to target specific life events.

“We teach the employers about times where you want to talk about this benefit,” Mecham says. Those times might include significant life milestones when an employee gets a raise, decides to buy a home, gets married, is having a baby or even when they’re receiving W-2 forms ahead of tax season, he adds. 

Engaging HR departments to help deploy the message can be a good way to make sure people know about these benefits, and especially related to those life events, Mecham says. “That’s part of a financial wellness program—not just having that benefit, but thinking of ways to continuously engage and remind people that that benefit is there,” he adds.

Changing behavior so the results follow

Many of the companies that become customers of the financial wellness program learn of it because an employee or manager has previously completed a YNAB budgeting program, according to Mecham. And no matter whether people take classes on their own or as part of an employer benefit program, the teaching is centered around a four-step rule

  1. “Give Every Dollar a Job”
  2. “Embrace Your True Expenses”
  3. “Roll With the Punches”
  4. “Age Your Money” 

“We teach people how to think about their money differently and then we find that the behavior follows and the results shortly thereafter,” Mecham says. People who follow the YNAB rules report an increase in savings, lower debt and a higher credit score, he adds.

Offering an outlet for employees to talk about some of the financial stressors in their lives, and providing tools that can help alleviate them, can be very impactful both personally and professionally, Maston says. “All that stress can have a mental impact and that mental impact could create days lost from work and that would impact productivity,” she adds.

And seeing the broader impact of eliminating this stress can be a boon to employers and employees alike, Mecham says. “If businesses end up doing this for their employees, I feel like it’ll be a big win just because you’ll have one less person stressed and a little happier,” he adds.

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