Written by: Taylor Boyd, Partner at Burnham Gibson Wealth Advisors
In today’s fast-paced and demanding world, the concept of wellness has expanded beyond physical health to encompass various dimensions of mental, emotional, and financial well-being. Within the context of cities and government agencies, ensuring employee wellness has become a paramount concern. Employees’ well-being directly impacts their productivity, job satisfaction, and the overall success of the organization. Among the different facets of wellness, financial wellness holds particular significance as it influences not only employees’ personal lives, but also their ability to plan for the future and contribute effectively to their communities. We feel there is a unique interconnectedness between overall wellness and financial wellness within cities and government agencies, highlighting the importance of addressing financial well-being as an integral part of promoting a thriving and sustainable workforce.
As cities and government agencies strive to create healthy and thriving communities, we feel special recognition is needed to support employees’ overall well-being. By fostering a culture of wellness, organizations can cultivate a workforce that is physically and mentally resilient, engaged, and motivated to contribute their best. However, overlooking financial wellness can undermine these efforts. Financial concerns often manifest in compromised well-being and job performance.
Why does financial wellness matter? Studies have proven time and time again that financial stress has multiple negative effects on employees and their organizations. Such as:
Productivity:
Financial stress can have a detrimental impact on employees’ productivity and job performance. According to a study by PWC[1], financially stressed employees are nearly five times as likely to admit personal finance issues have been a distraction at work.
Employee Engagement and Satisfaction: Financial wellness strongly correlates with employee engagement and job satisfaction. The 2022 Workplace Benefits Report by Bank of America[2] revealed that 91% of employers see higher employee satisfaction when they offer resources to manage overall well-being. Conversely, employees struggling with financial issues are more likely to feel stressed, disengaged, and dissatisfied with their work, leading to increased turnover rates and decreased organizational morale.
Impact on Mental Health:
Financial wellness significantly influences mental health. The American Psychological Association (APA)[3] states that financial stress is a major cause of anxiety, depression, and other mental health issues. Stress related to money and inflation is at the highest level recorded since 2015.
Impact on Health Benefits Costs:
Financial wellness is closely tied to the overall cost of health benefits. Nearly three-quarters of employees experiencing financial stress also experience physical symptoms[4]. Financially stressed employees can impact the organization’s healthcare cost. Prioritizing financial wellness allows organizations the potential to reduce healthcare costs and create a healthier workforce.
Before organizations can create solutions for employee financial stress, we must understand the root issues of this stress. Some of the largest employee concerns revolve around the following:
Inflation:
According to a report conducted by Mission Square[5], 64% of respondents are worried or extremely worried about inflation. More and more government employees are getting pinched and feel that they will need to cut back their retirement savings rates.
Lack of understanding:
A survey conducted by the National Association of State Retirement Administrators revealed that 66% of state and local public employees do not understand their pension plan. Let alone the countless more that fail to create a plan to maximize their individual pension needs.
Savings:
An Empower study[6] showed that participants with incomes under $60k have savings rates 52% lower than those making over $120k. The study also showed major issues with engaged participants and unengaged participants. Unengaged participants’ average account balances are only 40% compared to engaged participants.
CALPERs Pension Issues:
The Los Angeles Times reported[7] the downturn in the stock market during 2022 will lead CALPERs pension funding ratio to fall from 85% to 78%.
We feel the best way to navigate these issues is to help cities and government agencies encourage education on wellness. A comprehensive education on wellness leads to enrollment in retirement plans. When people save more and in an amount that fits their goals, fruitful investments become a more probable outcome. Financial wellness encourages participants to find their optimal plan past enrollment. Preparing for an optimal plan includes recommendations for savings amounts, debt discussion or consolidation, asset allocation, and retirement readiness. Engaged or unengaged are metrics that Empower[8] values, reporting a jump in savings rates from 4.3% with unengaged participants to 8.3% with participants using financial wellness.
Any step toward financial stability is worthwhile, but we have a few specific strategies that have served us and our clients well.
Know Your Workforce:
Understand whether group meetings or one-on-one meetings are most effective. Many employees do not feel comfortable asking questions that pertain to their personal situations in group or web meetings.
Targeted Campaigns:
A comprehensive retirement plan takes years to create, so consider running a retirement readiness campaign aimed at employees who are nearing retirement age but aren’t quite there yet. Ensure employees understand how pension and deferred compensation plans can and should work together.
Advice:
Per the report from Empower, only 13% of public sector employees are talking with a financial advisor to get help. Mission Square’s report shows that 43% of all respondents would find investment advice from financial professionals to be extremely helpful.
The statistics regarding financial wellness within government agencies and cities paint a concerning picture. A significant number of public employees lack understanding about their pension plans, feel behind in their retirement savings, and have not saved anything for retirement. These challenges not only impact individual employees, but also have broader implications for government agencies and cities as a whole.
However, there is hope for improvement. Many employers have recognized the importance of financial wellness and are taking steps to address it. By implementing comprehensive financial wellness programs, government agencies and cities can empower their employees to make better financial decisions, plan for retirement effectively, and ultimately enhance their overall well-being.
Education and communication are key pillars in promoting financial wellness. By providing accessible and comprehensive financial education programs, employees can gain a better understanding of concepts like retirement planning, budgeting, and debt management. Regular communication and workshops can reinforce this knowledge and keep employees engaged in their financial journey.
Additionally, offering retirement planning support, personalized tools, and access to financial advisors can significantly aid employees in making informed decisions about their savings and investments. Automatic enrollment and contribution escalation features can make it easier for employees to start saving and gradually increase their contributions over time.
Collaboration with financial institutions can provide benefits such as discounted financial planning services and access to low-cost investment options, ensuring that employees have the necessary resources to improve their financial well-being. By prioritizing financial wellness, government agencies and cities can not only improve the lives of their employees but also enhance overall job satisfaction, productivity, and retention rates. Working with an independent firm to assist the city or agency in this process can provide valuable third-party insight to help solve these issues. Together, we can build a future where financial wellness is a reality for all within government agencies and cities.
This communication is for informational purposes only and does not purport to be a complete statement of all material facts related to any company or industry mentioned. The information provided while not guaranteed to accuracy or completeness has been obtained from sources believed to be reliable. The opinions expressed reflect our judgment now and are subject to change without notice and may or may not be updated.
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[1] https://www.pwc.com/us/en/services/consulting/business-transformation/library/employee-financial-wellness-survey.html
[2] https://business.bofa.com/content/dam/flagship/workplace-benefits/id20_0901/documents/2022-WBR.pdf
[3] https://www.apa.org/topics/money#:~:text=Stress%20related%20to%20money%20and,%2C%20grocery%20costs%2C%20etc.)
[4] https://www.hrmorning.com/articles/financial-wellness-program-benefits/
[5] https://slge.org/wp-content/uploads/2023/02/59976-slg-worker-report_final.pdf
[6] https://docs.empower.com/empower-institute/EAFJ-2023-Government-Study.pdf
[7] https://www.latimes.com/business/story/2022-09-29/are-calpers-calstrs-other-pension-plans-headed-for-crisis
[8] https://docs.empower.com/empower-institute/EAFJ-2023-Government-Study.pdf
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