Opinion: Why you should care about your staff’s finances


Ensuring staff have the ability to manage their finances is a win-win initiative.


By Dr Pushpa Wood.

Is it the responsibility of employers to build the financial capability of their staff? In one word: yes! Your employeee’s financial concerns and problems are your problems too.

It makes business sense to have employees with sufficient literacy, numeracy and financial capability skills. People spend a significant proportion of their waking hours in their place of work and it’s been estimated by FELA (Financial Education and Literacy Advisers) that American workers spend an average of 28 hours per month researching personal financial issues.

Manulife's 2014 Health and Wealth Wellness Study also found that employees who are stressed about their financial situation are twice as likely to be distracted or unfocused at work. In fact, those who felt comfortable with their finances were 22 per cent more engaged in their workplace and 18 per cent more likely to say they were motivated in their work.

In the past five years the Commission for Financial Capability has put a spotlight on the number of New Zealanders with insufficient ability to manage their financial affairs, plan and provide for their retirement and, above all, save for an emergency. Employers need to recognise their workforce mirrors society at large and, therefore, they will have some staff with inadequate personal financial management skills – and in most cases those employees will be having a negative impact on their business bottom line.

Manulife's study, which included data from over 2,000 working Canadians, contained some figures that really grabbed my attention. While there hasn’t been a scientific study to measure the financial resilience of New Zealand workers, I would expect similar results here.

It found financially unprepared employees were 80 per cent more likely to be living payday to payday. They were also 67 per cent more likely to be worried about a lack of money for emergencies and 65 per cent more likely to be distressed about their financial situation. They were also 44 per cent less likely to have a retirement savings goal. It’s easy to see why employees in this situation might not be totally focused on their work

Westpac Massey Fin-Ed Centre (Financial Education and Research Centre) director Dr Pushpa Wood.


Financial skills help individuals, families and communities

A lack of financial capability skills has far reaching consequences, not only for an individual but also for their family, workplace, the wider community and the economy. Former Commerce and Consumer Affairs Minister Paul Goldsmith understood this. When announcing the Government’s Statement on Building Financial Capability in New Zealand, he said: “At the moment almost a third of New Zealanders have low levels of financial knowledge. If we can improve their financial capability we can improve the wellbeing of our families and communities. Financial capability allows people to better shape their lives, avoid hardship, and meet their goals.”

There are a number of looming factors that make it increasingly urgent to lift the financial skill levels of New Zealand’s workforce. We have an ageing workforce, combined with a lack of retirement planning. There is growing reliance on borrowing, rather than saving, and we currently have easy access to loans, with record low interest rates. There is no longer a stigma related to ‘borrowing’ and finance product and service providers have become increasingly clever with their marketing.

Combine this with a poor understanding of the long-term impact of debt, and you can see why it is a problem that will not go away without intervention. Tomorrow’s employees often leave university with significant student loan debts – the average loan held by Inland Revenue as part of the Student Loan Scheme is $20,983 and the median repayment time is 8.4 years.

The Westpac Massey Fin-Ed Centre’s Longitudinal Study found that young Kiwi’s lack educational opportunities to help them develop sound personal financial management skills. That’s why the centre developed the Money Smarts @Work course. It recognised the the importance of a financially capable workforce and, with support from the Westpac Bank and in collaboration with industry groups, it developed a short, flexible, self-paced financial literacy course that is ideally suited to the time demands of people in the workforce.

The course makes learning the basics of financial capability affordable and easily available to those people who would not otherwise have access to education about managing their personal finances. The course introduces some of the principles, tools and techniques necessary for personal financial management. It has been trialled with a number of employees to ensure that it is relevant and engaging.

Students have the opportunity to complete the following five modules over eight weeks:

  • Setting SMART goals and realising dreams
  • The how and why of budgeting
  • Saving for the lifestyle I want
  • Getting in and out of debt
  • Protecting what’s mine.

So, how do employers help fill the gaps in their employees’ financial education? The first step is to carry out a needs analysis for your organisation. At the Westpac Massey Fin-Ed Centre, we often refer to it as a financial health check. This will help you introduce the right programmes, support networks and policies.

It is important to introduce a needs-based financial capability programme and it is always better to provide staff with various options, rather than taking a ‘one size fits all’ approach. We always recommend companies implement a holistic or ‘whole of organisation approach’ to building financial capability. This is best done by raising the status of financial capability so it is part of your company’s development and wellbeing programme, rather than taking a ‘bolted on’ approach.

Benefits will come at both an individual and organisational level. At a personal level, staff will be less stressed, more engaged and better prepared and more resilient in times of change.

And if your employees are financially capable in their personal lives, they are more likely to take interest in the business – the finances, budgets and profit and loss statements – of your organisation, managing their team and unit budgets more effectively. Better still, research indicates a strong correlation between lower levels of financial stress and and an employee’s productivity at work.

Dr Pushpa Wood, is the director of the Westpac Massey Fin-Ed (Financial Education) Centre, a research and education centre based at Massey University that aims to help improve the financial wellbeing of New Zealanders.

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