February 28, 2021

People have always been urged to save for a rainy day. But never has the vital importance of emergency savings been illustrated as clearly as during the Covid-19 pandemic.  How can companies both help and reassure their employees in 2021?  But never has the vital importance of emergency savings been illustrated as clearly as during the Covid-19 pandemic. 

The pandemic has challenged people at every level, and their finances are no exception. For many, 2020 has been a time of reflection, people are re-examining their financial resilience and are not happy with what they have found. 2021 could be a turning point for people’s levels of financial literacy and preparedness, if they are equipped with the right tools to translate their concerns into meaningful change.

Seeing money differently

Sadly, the last year has been a very testing one for the economy. Even for employees who kept their jobs, 2020 was a stressful and uncertain time. However, it presents a clear rationale for people to take control of their finances.

“When thinking of building an emergency fund, in the past people may have thought that there would be some warning and so they would have a bit of time to prepare. The Covid-19 pandemic proved that theory wrong and showed the benefit of having an emergency fund at the ready in good times and bad,” says Jeanette Makings, Head of Financial Education Services at Close Brothers Asset Management.

During the pandemic, many people have realised that they can live more frugally. This realisation creates opportunities to save for the future. Almost half (44%) are spending less and 17% say they can happily live on less than they were spending, according to Changing Trends of Financial Wellbeing, a 2020 report by Close Brothers.

Almost three quarters of people (73%) say they have had more time to focus on their finances during the pandemic, but 33% have yet to do anything about them. Half plan to make changes, with the most popular changes being to keep a closer eye on day-to-day spending and putting more into their rainy-day fund.

However, without the right support, these good intentions could evaporate as we emerge from the crisis. “Usually, the human condition is such that, when obstacles are removed, we tend to bounce back quite quickly. But given the significant impact of Covid-19, it remains to be seen whether some behavioural changes remain once it passes,” says Makings. 

Why employers should help

In these enormously challenging times, employers need people to be at their best and most productive. But people are expending vital energy worrying about money. 

One in five (21%) worry about their financial health at least once a day, and one in nine say they worry about it constantly, while only 19% say they don’t worry about it at all. 

This is affecting people’s physical and mental health. Almost half of UK employees (42%) have lost sleep due to money worries.

These issues are particularly acute among 18 to 24-year-olds, with 45% having suffered mental health problems because of money concerns and 20% saying their physical health has been impacted.

When workers worry less about money, they become more productive employees, making the case for focusing on financial wellbeing a clear win/win. 

As Makings says: “Now is the time for employers to act. The pandemic has created such momentum for people to focus more on their finances; to feel the benefit of budgeting and financial planning; to understand the need to look at financial protection; planning ahead and having an emergency fund. There has never been a better time to capitalise on this by providing access to financial information and guidance, to instil and embed those good financial habits.”

Turning good intentions into action

Employers occupy a unique position of authority and trust in many people’s minds. They are ideally placed to help people translate their intentions into meaningful change. What should companies do to make 2021 a transformational year?

“The best financial education and wellbeing strategies are those which help employees to understand their workplace benefits and wider finances and make the best use of the opportunities that they already have,” says Makings. 

When employers educate people on the benefits they already have, they are putting them in the best possible position to make informed choices from a place of greater control.

Organisations should remind employees about services already on offer. “If you offer an Employee Assistance Programme with debt counselling included, remind people that it exists, that it is anonymous and encourage them to use it as needed,” suggests Makings. 

Many employers also offer protection benefits, such as life assurance, private medical insurance etc. Again, it’s a good idea to remind employees that they exist and encourage them to find out more.

It is also within an organisation’s power to offer more flexibility. When times are tough, people can really appreciate the support to review savings plans (such as shares/ pensions) and make short term changes to create more disposable income if needed for a few months. However, the support for this should include education and access to modelling tools, so employees can understand the short- and longer-term implications of such changes. 

In 2020, much of the UK workforce worked from home. Many people are now used to interacting with work-related information via the web. Employers could capitalise on this and offer online education, webinars, Q&A sessions, and financial guidance counsellors. 

Companies can also review their communications, ensuring that they are talking to employees when their messages are most likely to hit home. For example, reminding people that March and October are ‘Free Wills Months’ for those aged over 55.

These are just a few ways in which organisations can empower their people to turn good intentions into lasting action, making greater financial resilience a positive reaction (or result) to come out of 2020. 

(author PM Insight)

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