It is important to understand why Financial Wellness became the highest sought after employer benefit program in past two years. The Corona Pandemic brought about huge health and wealth adverse impact, high uncertainty in job prospects and future uncertainty across India, thus forcing everybody to think about their current financial situation and their financial wellness readiness.
And why is Financial Wellness growing in popularity in India?
There are multiple aspects to Financial Wellness – many times in the normal run of life, it is difficult to think through it in an expert manner. Hence, this blog will help you look at topics that matter very high in your priorities now. These are some common query that we hear all the time from employers, employees and even their friends and families.
- What is Financial Wellness?
- Why Does Financial Wellness Matter to you and your loved ones?
- Who Needs Financial Wellness?
- Where To Get a Financial Wellness Program ?
- How and When Is Financial Wellness Delivered to Employees?
- What to Expect from a Financial Wellness Program?
- How much Financial Wellness Engagement and Utilization is there?
- How much is Financial Wellness Program ROI ?
There is a lot of talk about financial literacy and how a significant portion of Indians cannot pass even the most basic of financial literacy tests. Not really a fault of their own – Financial Education is a life skills and has not be taught thoroughly in most of our school and college curriculum.
Our own survey found that only 67 percent of Indian adults are financially literate and confident about their financial planning. Many can do much better with money matters with just a little bit of education and planning for financial wellness.
In our own financial wellness seminars through Omozing, we help people understand financial terms such as compounding interest, inflation and risk diversification in investments and their profound impact in their lives as time passes by. We touch upon behavioral finance and how we can avoid common mistakes and pitfalls to make our money journey worthwhile.
Unfortunately, although financial literacy is a needed component, it is not the definition of financial wellness.
If 67 percent of adults are financially illiterate, it would stand to reason that a similar percentage of adults should be financially not-so-well, and we do see that is the case. In fact, as India is moving through the urbanization and formalization of economy, there is more acute need of financial awareness and financial wellness programs to help make sound economic decisions for long term in sync with personal and family future plans.
Even before the horrible COVID pandemic two waves in 2020 and 2021, a majority of Indians had financial concerns. Now they are in the face – job losses, steady income uncertainty, capital erosion by healthcare expenses are real scares now.
Our interactions and surveys found that:
2 in 3 Indians feel that finances control their lives and take away peace
8 out of 10 wonder if they will have enough to retire
3 in 4 Indians are concerned if their earnings will keep up with the cost of living
1 out of 2 borrowers continuously worry about managing debt
To make matters worse, those experiencing acute financial stress are less likely to engage in healthy financial habits such as creating a budget, saving and making financial goals. Moreover, they don’t find enough expert consultation that help them make right financial decisions and follow through in their good financial behavior to regain control of their financial destiny.
So, if financial wellness is not simply financial literacy, what is it? If you go by The 9th Annual PWC Employee Financial Wellness Survey of 2020, even in USA, the biggest cause of stress is financial stress.
What is Financial Wellness in Indian Context ?
Financial wellness means to be stress-free and achieve financial stability, which includes being debt-free, having savings, meeting day-to-day expenses, retiring on time and having the freedom to make life choices.
We can expand upon this basic definition: Financial Wellness is having the knowledge, ability, and desire to make intelligent financial decisions so that one can have the capacity to live a happy life within one’s means and be stress free.
Today, Financial Wellness is also having ACCESS to interactive digital tools, expert guidance and knowledge that educate, motivate, and empower individuals to reach their own financial goals with confidence.
Why does Financial Wellness Matter ?
Instead of focusing completely on financial literacy, we believe that a comprehensive multi-dimensional approach that focuses on financial literacy, basic money skills and personal behavior changes will make the biggest difference in your employee’s lives.
Financial Wellness Programs which allow individuals and employees to bring their financial planning and budgeting plans in their lives easily work better. Good financial wellness programs can address problems such as lack of emergency savings.
Many Indians faced acute money stress and were unable to cover emergency situations in pandemic times. Many people who had emergency savings emerged more confident, and were able to help their families and friends too in very precarious pandemic or lockdown or job loss situations.
For instance, financial wellness can address problems like the following:
Those who had access to formal credit were able to get money at much cheaper rates. We heard that informal money lenders were charging even 5%-10% monthly interest rates during these tough times.
Financial wellness programs help individuals understand the financial concepts behind the financial opportunities and challenges they are facing or may face, and go further to provide skills and action steps that can reduce the hardships.
Financial wellness focus puts financial acumen into action in the lives of your employees.
Who Needs Financial Wellness ?
There is a misconception that financial stress happens primarily to those who do not make a lot of money, such as entry-level workers, or among younger employees who haven’t had the time or experience to understand their finances or who are just beginning their careers.
The truth is that financial stress happens across all spectrum of workers, whether that be age, income, sex or race.
Although entry-level workers or low income workers were the most financially stressed group, many decently paid workers too experience stress because of poor investment decisions, or being stuck in illiquid investments or just living beyond their means and having a sense of impending money crisis.
A PWC survey looked at life stages and found that each stage of life contained financial stressors regardless of income level:
Those nearing retirement may be caring for an aging parent or trying to help a child through college while still putting money away in their own retirement funds.
Entry-level employees are often strapped with student loans and may have difficulty creating a budget that will simultaneously allow them to pay off their debts, get an early start on retirement savings, and save for a down payment on a house.
Employees of all ages deal with life events such as marriage, child education, buying a decent house, or the birth of a child as well as financial issues such as getting spending under control, paying off debt, saving for major purchases, figuring out the best investments, and managing healthcare expenses.
So, Who needs financial wellness?
All of us. Without exception.
Regardless of their score on the financial literacy test, three out of four individuals believe they could benefit by acquiring the right financial information, skills, and attitudes.
Where To Get a Financial Wellness Program
There are many different financial wellness providers, each having its own strengths and weaknesses.
Here are the major providers of employee financial wellness programs:
|Banks||A majority of Indians have some sort of relationship with a PSU bank or Private Bank allowing financial wellness to reach a large number of people||These programs have the potential to be biased toward and promote their own bank products and services. Most bank staff are highly pressed for time, thus may not be able to devote enough time required for a customer.|
|MF, Insurance Agents and Financial Advisors||Financial planning is their occupation, so it is a natural fit||Potential for biased information or a conflict of interest promoting specific products. Likelihood to focus too much on retirement plan participation or mismatched product selling. Many times their approach is narrower, and not comprehensive. Centered on their own niche.|
|Financial Wellness Companies||Ability to offer unbiased information in a holistic manner||Depending on the delivery system with financial digital tools and latest technology, may be selective or premium priced for targeted delivery|
How and When Is Financial Wellness Delivered to Employees?
We take into account the employer industry segment, size, nature of workforce and work locations in India. Tere are many different methods for delivering financial wellness information, tools, and action steps – each with its own pros and cons.
|Digital Tools||Private; lower cost due to economies of scale; can be individualized||Without the right communication, employees may not be aware of the program; some employees may feel uncomfortable using technology and may need assistance to get the most out of tools.|
|One-on-One (includes live chat and telephone)||Private; offers individualized information||High Cost. Program Outreach takes time - needs selection and prioritization of cases.|
|On-site WorkshopsWellness Companies||Low cost; easy to promote and conduct; offers information to a large group at once||Lack of privacy; information is less individualized and action plans shall be more participating segment oriented|
|Online Webinars||Low cost; easy to promote and conduct; offers information to a large group at once||Lack of privacy; information is less individualized; employees may feel uncomfortable sharing their unique situations|
Employees tend to use financial wellness programs when they need specific information. Employees typically seek financial guidance when making an important financial decision, or when in the midst of a financial crisis or when experiencing a life event.
That’s why a good financial wellness program should offer both ongoing, proactive education to help individuals avoid financial problems and stay on track, as well as just-in-time education to offer solutions to current personal situation focused problems.
What to Expect from a Financial Wellness Program
Not all financial wellness programs are created equal.
However, the best programs bring in experts, and offer a wide variety of courses, tools, and assessments to help employees on their path toward financial wellness.
At Omozing, we offer such programs as:
• Interactive courses on topics such as savings, targeted goal savings, EMI comparison calculators, budgeting, retirement planning, investing, and anti-fraud courses.
• Interactive tools such as a retirement analyzer and planner, home affordability tools, budgeting tools, simulators and ready reckoners for good money scenario planning
• Interactive assessments such as the financial wellness checkup, financial stress assessment, and an engaging money personality and financial behavior assessment.
Financial Wellness Engagement and Utilization
Continuous Engagement with your financial wellness program will help your company understand how employees use and engage with the program and how often they do so. Having this information will help you fine-tune the program to meet the needs of your specific employees. Some program goals address the general population of employees (such as reducing financial stress) while others address a more limited population (such as reducing high debt or starting an emergency savings account). Companies that create goals, measure metrics, communicate to employees, optimize their websites, and offer incentives to join financial wellness programs are more likely to get very significant employee participation.
Financial Wellness ROI
The most fortunate part of offering a financial wellness program to your employees is that helping them become financially well is also good for the company—the return on investment for such programs is substantial. When employees participate in financial wellness, companies experience greater productivity, higher participation while reducing absenteeism, employee turnover and healthcare costs.