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Enriched Academy Staff
Research by the Financial Consumer Agency of Canada has revealed that financial worries are the leading cause of stress for Canadians, surpassing the amount of stress stemming from either relationships or their jobs. The tables have turned and rather than focus on how our job is affecting our personal life, the focus is shifting to how our personal life (especially finances) are affecting our job performance.
Some research has been done and the new isn’t good for employers. Employees dealing with financial stress are twice as likely to report poor health issues including sleep problems, headaches and other illnesses. They are also more likely to be absent, use sick leave or quit altogether; have lower morale and engagement; poor working relationships; and show lack of focus and poor decision making. For businesses, this can result in administrative and financial errors, workplace accidents, production errors and poor customer service.
The consequences of financial stress have a very real cost to your organization. A 2019 study by the Canadian Payroll Association (CPA) revealed that 46% of all Canadian employees admit to being distracted by financial stress at work causing an average 8.1% loss in productivity. Extrapolating that data to an organization of 300 people making and average of $64,000 results in almost $700,000 in lost productivity over the course of a year!
Keep in mind that the CPA study was done prior to the pandemic and does not reflect the financial stress the average Canadian is now facing due to rapidly increasing interest rates driving up mortgage and loan payments, skyrocketing prices due to inflation and supply chain constraints, and most recently, volatile financial markets.
If you need more proof of mounting financial stress, the National Payroll Institute just released survey results that show a 26% increase in the number of Canadians living paycheque-to-paycheque in just the last year. The average non-mortgage debt is now over $21,000 with the latest household debt-to-income ratio (the amount of debt to disposable income) at an all-time high of 181.7% according to the latest figure from Statistics Canada.
Many Canadians are struggling financially and the question all employers should be asking themselves is, “how much is poor financial wellness impacting the success of our business?”
While organizations across the country are bolstering employee assistance programs to improve the overall well-being of their staff, one area that has been widely ignored is the effect of financial stress in the workplace. It is very ironic that despite the intensifying focus on employee wellness, the #1 concern of employees themselves is receiving scant attention.
Many employers already provide pensions, matching RRSP contribution schemes, and various other financial benefits as part of their EAP. A financial literacy education program greatly complements these benefits by raising awareness and helping employees understand how to take full advantage of the available benefits and leverage their impact. For example, teaching employees how to invest and grow their RRSP rather than just helping out with matching contributions. A lot of Canadians are unfamiliar with even basic investing knowledge such as the effects of compound interest, investment fees, index funds and ETFs, risk management, or how to use RRSPS and TFSAs to defer/reduce taxes and grow their retirement nest egg… or help purchase their first home.
Retirement planning is another complex issue for employees. A company pension plan is a great asset to have but adding an education program to help employees make good decisions now and lay down a roadmap for retirement will give them a lot more assets down the road. Gaining the financial knowhow to manage your retirement plan and feel comfortable about your financial future will also allow employees to focus much better on the job at hand.
When you invest in the financial well-being of your employees, your business will benefit from higher productivity, better morale, lower absenteeism and turnover, and better talent attraction. A 2017 study by Sun Life Financial showed that 70% of employees feel their employer should support their employees financially and 84% would be interested in financial education programs in the workplace.
By implementing a comprehensive financial education program and not just paying lip service to the issue with a “lunch & learn” (they are just one of many tools) you demonstrate a lasting commitment to your employees and their families. Effective financial education programs for employees offer a number of training resources and options including live or virtual sessions, self-guided online programs, and options to consult and seek advice from financial professionals.
The timing of when employees need financial advice may range from imminent (i.e. they are fending off calls from bill collectors while at work) to long-term (i.e. they are unsure of how best to start planning their retirement) and companies need to be prepared to support with either of these timelines. Even your best/irreplaceable employees can get into financial difficulties (they may be creative geniuses or masters of other tasks… but miserable with money) and it is in the company’s best interest to do what you can to help them get through their financial issues.
Financial pressures have seriously mounted in 2022 and a lot of employees are turning to their employers to help out, and the first place they look is to bolster their household income with higher wages and salaries. While more income is certainly going to help, it isn’t always feasible based on the company’s financial situation. More money will also never become a long-term solution if employees continue to make poor spending decisions or overspend, fail to adequately save and invest, and put off their long-term financial/retirement planning until later in life.
There are lots of bankrupt athletes and entertainers who have clearly demonstrated that you can always spend more than you make, regardless of your income! Focusing only on the top line (income) when it comes to your finances is a common mistake. Anyone who has followed Enriched Academy knows that we teach the skill of saving and investing is much more important than the skill of earning.
Millionaire Teacher author Andrew Hallam has been a regular guest over the years in our live webinars. His book is proof that a steady income and some knowledge of basic investing principles combined with a high school English teacher’s salary can lead to early retirement and a very comfortable life post retirement.
Companies are increasingly caught in the trap of having to offer more money to keep their employees happy and stop them from bolting to the competition for slightly more salary (especially as inflation bites). However, they should also be looking at adding proactive education measures to help improve their employees’ financial life and stop them from job shopping in the first place.
The reality is that personal finance is likely to get even more difficult and more complicated in the future and helping your employees master their financial life will pay increasingly valuable benefits to both employees and employers. If you would like to learn more about how programs from Enriched Academy can help your organization get ahead of the curve, please reach out to [email protected]