Financial wellbeing: Let’s talk about money

The World Health Organization (WHO) defines health as a “state of complete physical, mental and social wellbeing and not merely the absence of disease or infirmity”.

The good news is that organizations around the world recognize that mental wellbeing is a critical factor in not just the health of their employees, but also the health of their business.

The WHO estimates the effect of depression and anxiety alone leads to approximately 12 billion working days lost every year.

At an estimated cost of $1 trillion in lost productivity, this huge financial burden is only going to get worse if we do not address the issue of mental health.

In its 2023 Health on Demand report, health and benefits consultancy, Mercer Marsh Benefits, surveyed over 17,500 employees in 16 markets across the globe about their priorities when it comes to health and wellbeing.

Alongside some other startling insights, more than half (52%) of employees surveyed admitted they have worked while feeling mentally unwell.

Like any other element of health, many underlying conditions can affect one’s mental wellbeing and consequently, one’s work. One significant factor that contributes to overall mental wellbeing is also one that most people do not like talking about: money.

Financial discussion across cultures

Cultural norms on talking about money and personal finances vary across the world. In some cultures, people consider discussing money to be taboo while in other cultures; they see it as a sign of trust and openness.

To Japanese people, discussing personal finances is highly impolite. They believe discussing money can lead to envy, jealousy, and other negative emotions. In other parts of Asia, it is more common for people to discuss their finances openly. Discussing income and money in China is a way of building trust in a relationship with another person.

In many Western cultures, people are less inclined to discuss their personal finances. Money is a topic often stigmatized, shamed, and feared. There is a pervasive societal belief that financial struggles are a reflection of personal failure, which leads people to internalize their problems and avoid open discussions about their finances.

The root cause of this reluctance varies. Parents, educators and our peers sow the seeds of financial literacy as we grow from child through adolescence to adulthood.

Our parental upbringing, education and peer group all influence our learning, behavior and decision-making in relation to money and finances.

Unfortunately, many countries lack any form of personal finance education for children and few parents teach their children much beyond how to manage their pocket money.

Finances across life stages

Once people reach further education or start a career, they find they are ‘expected’ to know how to handle their finances. Those that choose to attend college or university before starting their career, emerge bright-eyed and enthusiastic into the world of work often saddled with student debt they may have no idea of how to manage.

Other significant ‘life-moments’ also influence an employee’s finances. Starting a family, investing in a new home, or planning for retirement are major stages in life‘s journey. All have an effect on managing personal finance day-to-day.

Unexpected life events can also cause financial difficulty and emotional distress and these events can have a long-term impact on an employee’s physical and mental health. They can also make it harder for people to manage their money.

One of these ‘unexpected life events’ posing the largest threat to people’s financial wellbeing right now, is the cost of living crisis. Few of today’s employees have experienced ongoing inflationary pressures and rising interest rates during their working lives, causing many people to experience unprecedented financial stress.

The burden of higher expenses is squeezing household budgets and is forcing people to make difficult choices; from reducing spending on leisure, cutting back on retirement savings, or postponing major life plans.

Getting into the data

When asked what factors would affect them and their family this year, over half (56%) of the employees polled in Mercer’s Health on Demand survey were concerned about an economic downturn.

Studies across the world acknowledge that people with financial problems are more likely to experience depression and anxiety.

Research also indicate that people with low levels of financial literacy are more likely to experience financial hardship, which in turn leads to lower levels of happiness and wellbeing.

Mercer’s survey revealed that two in five employees (41%) that had access to financial wellbeing and planning tools said they were a helpful benefit. Unnervingly, almost three-quarters (73%) of employers do not provide employees with any form of financial wellbeing and planning tools.

The current economic conditions are putting enormous pressure on people and it is more important than ever for employees to feel able to talk about money.

But who can they talk to? Managers are a trusted source of information for their employees, but are they qualified to provide them with financial education and guidance?

Employees need safe spaces in which to discuss their personal finances. Spaces that provide access to personal finance advice and an environment where they do not feel judged or shamed if they struggle to balance their personal or family budget.

These days, employers can deploy a variety of tools that create safe spaces to help employees with their financial well-being, including access to financial advisers, personal finance courses, and more recently, AI-based programs and apps.

In this regard, the future is bright.

Next steps

Artificial intelligence has the potential to provide apps covering the fundamentals of personal finance that help users stick to budgets, meet financial goals, and even offer predictive analytics around a person’s finances.

AI systems can now do a lot of the heavy lifting, creating customized actionable items and financial strategies based on a person’s cash flow, spending history, and future cash income. Potentially, a single AI system would do the work of a human financial advisor for hundreds of employees.

The most important consideration is employers need to understand exactly what their employees need in the way of financial wellbeing support. Simply deploying a whole host of tools to support employees without understanding their needs is a fruitless exercise.

To help its clients, Mercer is already developing a diagnostics tool to help employers gauge financial wellbeing and ability among their workforce demographic, and to further identify the best support solutions to deploy.

Money worries are a common cause of poor mental health and businesses have a vital role to play in supporting their employees’ financial and overall wellbeing.

By taking steps to support their employees’ financial education, employers can improve employee resilience, productivity, and retention as well as reduce absenteeism and presenteeism.

As Mercer’s research shows, employers do not necessarily consider their employees’ financial wellbeing as a priority, yet. They may need a nudge.

Employees need to recognize they are not alone. It is important for employees to have open, honest conversations with their employer about financial wellbeing programs.

It is time to talk about money, and the tools needed to support financial wellbeing.