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The U.S. Consumer Financial Protection Bureau sponsored a webinar this week to discuss Financial well-being: What it means and how to help. This study provides the first-ever definition of financial well-being created directly out of the voices of consumers. Consumers can experience financial well-being –or lack of it- regardless of income. The sense of financial well-being is not fully described by objective financial measures, it is defined as having financial security and financial freedom of choice, in the present and in the future.

Understanding financial well-being is crucial to helping consumers achieve it.

The four elements of financial well-being

The researchers on the Consumer Financial Protection Bureau interviewed consumers and financial professionals to learn how people experience financial well-being. That data along with an analysis of exciting studies of financial literacy, psychology, decision making, and related fields helped to create the following visual guide which outlines the factors that lead to a person’s financial well-being at a specified moment.

What influences financial well being

The diagram acknowledges that at any time, some factors of financial well-being are within a person’s control, and some aren’t.

Social and economic environment can expand or limit a person’s opportunities. Take for example, some employees are offered a retirement plan at work, while others aren’t. This presents a decision framework that can make a difference in an action the employee may take. For example some employers require workers to opt into a retirement plan, while others make participation automatic and allow employees to opt out.

Financial behavior is also influenced by personality, knowledge, skills and attitudes. The actions consumers take, within the choices available to them, create their level of financial well-being.
American consumers are struggling with feeling uneasy and financially insecure. Many families report living paycheck to paycheck. At night many Americans ponder how to make ends meet. Seven out of ten American workers say financial stress is their most common cause of stress. When morning comes these same individuals take their place in offices and businesses where they are expected to do their best to help their employer succeed. These workers don’t leave their money works at home.
“Financial wellness at work is increasingly important both to employers and to employees,” said CFPB Director Richard Cordray. “A financially capable workforce is a more satisfied and engaged workforce that is also more productive…”
The Financial wellness at work, a review of promising practices and policies report outlines a business case for financial wellness and the opportunity for employers. It is intended to serve as a resource for employers who are interested in promoting employee financial well-being by helping their employees develop the skills to better manage their money.

The business case for financial wellness and the opportunity for employers.

  • Financial stress and employer cost
    • Financial stress is often cited and a distraction from work and a factor that reduces productivity and engagement. Surveys report that debt stress has a high negative impact on health.
  • Employee engagement
    • Engaged employees are defined as those who are not only satisfied with their work, and company, they also are enthusiastic and committed to the mission of their company and willing to go the extra mile for the company. Financial wellness appears to be positively correlated with satisfaction with and pride in the employer’s company.
  • Leveraging existing benefits
    • Companies that utilize programs to enhance the financial capabilities of their employees can maximize the benefit they get from existing investments in employee benefits. 401(k) plans are a case highlighted in the report. Employers invest heavily in 401(k) plan design and management, the delivery of investment advice and matching contributions. The goal is to build employee loyalty and ensure employees are able to finance their retirement. Unfortunately many employees are using their 401(k) plan as an expensive form of emergency savings.

The study suggests that a more comprehensive financial education program which includes goal-setting and debt management can provide employees with important information about both the value of their benefits and the importance of balancing short-term needs against long-term goals, whereas training solely on the basics of a 401(k) plan does not accomplish this.

  • Education is a low-cost/high-return opportunity
    • Programs that build financial capability and enhance financial wellness offer the potential to leverage employer investments and create a large payoff for a small expenditure. Training programs to help employees build skills in budgeting and saving to address needs before they become emergencies need not be expensive or complicated.

The mechanism for delivering financial wellness programs may be as important as the content. Employees may be reluctant to discuss embarrassing financial information with coworkers or even with contractors hired to deliver financial education unless it becomes an ingrained part of the workplace culture.

If financial fitness is to become part of the work place culture, begin the effort as new employees are hired and on boarded.

Employers are aware of the financial stress that most Americans deal with. Some companies are moved to help employees through financial troubles because they consider it the right thing to do. But employers who are motivated to take the necessary steps to develop comprehensive financial wellness programs are doing so for the following reasons.

  • Employers are keenly aware of the financial stress facing many employees and they are genuinely interested in helping the people who work for them.
  • Customer-centric businesses are worried that financially stressed employees will not provide the level of service required to succeed in a competitive marketplace.
  • Human resources professionals are concerned matching funds in 401(k) programs are being used to meet short-term emergencies, undermining an expensive benefit program.
  • Many employers believe financial wellness programs are an important way for employers to show they genuinely care about employees and are an effective way to reduce employee turnover and build loyalty.

Source: Financial wellness at work. A review of promising practices and policies, Consumer Financial Protection Bureau, August 2014.
Financial well-being: What it means and how to help, Consumer Financial Protection Bureau, 2017.

This article appeared in the July 2017 edition of ‘LearningEdge Monthly.’ To subscribe to the newsletter, please visit