Why Financial Wellbeing Matters

By Robin Powell  April 27, 2021

The concept of financial wellbeing is suddenly receiving plenty of attention. What is it? Why is it important? And most importantly, what can we do about it?     The global pandemic has brought into sharper focus the concept of “financial wellbeing”,  a holistic measure of personal security not typically captured by investment returns, consumer spending and saving data or macro-economic aggregates.

On some measures, financial wellbeing has been deteriorating in developed economies for years, thanks to privatisation of social services, rising divorce rates, the growth of short-term employment contracts, increasing consumer debt and the shift to defined-contribution retirement plans.  But the sense of isolation and loss of control that many people feel in increasingly market-driven economies with minimal safety nets became more intense in 2020 as COVID-19 cut incomes through job losses, furloughs or reduced hours.

Dealing with the unexpected

In the US, a wellness survey by PwC showed that many American workers were already in a fragile financial state going into the pandemic, with more than a third of the full-time employed having less than $1000 saved to deal with unexpected expenses.  The PwC report found with governments stretched and community services already beyond capacity, there was an important role for employers to pay in financial wellness.

“Employees are seeking guidance more broadly on how to prioritise their spending, which bills to pay, and how to handle creditors.” PwC said. “Employers have a unique opportunity here to help employees avoid making poor short-term financial decisions at the expense of their overall financial wellness.”

The Australian Government last November released a report showing many people had reduced their spending in response to the pandemic. Among the worst hit, one in seven had asked for a pause in their rent or mortgage payments, one in five had asked for financial help from family or friends and one in eight had sought welfare assistance.

In the UK, also, there is growing awareness of the role that employers can pay in addressing financial wellness issues, an effort that aside from the moral imperative also makes perfect business sense by helping staff regain a sense of control of their lives.

 The Money and Pensions Service, sponsored by the UK government, found almost eight in ten British employees take their money worries to work, affecting their performance. In fact, money worries are the biggest source of stress for people, with 4.2 million worker days lost each year due to absences related to lack of financial wellbeing.

To continue reading, please go to the original article here:

https://www.evidenceinvestor.com/why-financial-wellbeing-matters/