September 27, 2019
5 Fast Facts about Financial Stress

Personal finances. Love them. Hate them. But you must agree that they are anything but a hot topic, let alone water-cooler conversation in the office. In fact, The Scientific American found that 44% of people would rather talk about death, politics or religion than personal finances!

This poses a unique dilemma for us, as employers, how do we understand the scope of financial stress and how it affects our employees? 

Here are the 5 fast facts about financial stress you need to know. 

1. Financial stress is real and it runs deep.

1 in 2 Australians live paycheck to paycheck according to research by MLC and 1 in 3 Australian households aren’t able to access $500 in an emergency. That’s 3.6 million adults across the nation. This means minor expenses, things like car repairs and medical emergencies can spell disaster for families. Furthermore, PWC reports that financial stress is the #1 employee concern in the workplace.

2. No income group is immune from financial stress. 

You’d assume that the more you earn, the less susceptible you are to financial stress and you’re largely right. However, “lifestyle creep” (spending more as you earn more) can even leave high-income earners with financial stress. Recent research into financial stress shows that no income group is immune from financial stress. Those earning $50,000-$74,999 reported the highest level of financial stress (26%) and those earning $150,000 and above reported the lowest (11%). [AMP] 

3. The weight of financial stress affects both employer and employee.

It’s hard to focus at work if you’re stressed about your bills or rent, but what are the flow-on effects for employers? 

It’s well known that people suffer a loss in creativity, morale and productivity when concerned about their financial situation. Even more surprisingly, however, is how financial stress affects cognitive function. A report by Karrikins (EY) found that the IQ of an average individual drops to a state of “borderline deficiency" when financially stressed. On a productivity level, financially stressed employees lose 46 hours (or 5.75 days) per annum in sick leave and time spent dealing with finances at work due to their financial stress. A significant number of employers also noted presenteeism, low morale, and absenteeism as other consequences of poor financial wellness. 

4. Financial stress is on the rise in Australia

According to a report by MeBank, Australians are feeling increasingly stressed about their financial positions as falling home prices, weak job markets and stagnating wage growth continue in 2019. In fact, financial comfort across most of the 11 drivers that make up the index fell over the past six months, led by net wealth which recorded a 3 per cent drop to 5.54 out of 10. The two most commonly cited worries were the cost of necessities (44%) and the amount of cash savings on hand (34%). 

5. There are new tools for employers

From your traditional financial wellness workshops to new employer-sponsored and technology-enabled fintech benefits, financial wellness tools are becoming increasingly popular. Perhaps the most rapidly adopted benefits right now are those taking advantage of the “salary link” (access to the employer’s payroll system for income data and repayment) to offer tools such as early access to earned wages (flexible pay) and automated savings. These solutions allow employees to cover day-to-day crises without resorting to high-cost short term solutions like payday loans and significantly lower the barrier to entry of savings. According to a study by Harvard, salary link tools “show tantalising potential for significantly reducing employee turnover and saving millions of expense dollars annually at large employers” in addition to making implementing companies “employers-of-choice” and “the inchoate harms caused by financial stress on employees would be reduced”.

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Bennie LiuSeptember 27, 2019
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