FINANCIAL FINESSE RELEASES SECOND ANNUAL RESEARCH REPORT ON EMPLOYEE FINANCIAL STRESS
Study finds that employees’ financial stress levels are decreasing, but employees may be experiencing a false sense of security about their current financial situations.
Financial Finesse, the nation’s leading provider of workplace financial wellness programs, has released its second annual special research report on employees’ financial stress. The report identified a continuing downward trend in employee stress levels, but may have uncovered the beginning of a backslide into old financial habits due to a state of complacency about their financial situations.
The firm regularly tracks employees’ self-reported responses to an online financial wellness assessment and compiles the data to spot trends in employees’ current financial stressors and overall financial wellness. Key findings were:
• Employees’ financial stress levels continue to decline with only 16% of employees reporting “high” or “overwhelming” financial stress levels in Q1 2012—a decrease from Q1 2011 when 21% of employees reported “high” or “overwhelming” stress, and a significant decrease from Q1 2010 when these levels were at 30%.
• Despite a sluggish real estate market, homeowners reported significantly lower financial stress than non-homeowners. Employees who do not own their home were three times more likely to report overwhelming financial stress than those who do, despite the fact that the market has had a slow recovery, and that many home values remain lower than their purchase price.
• In some cases, stress levels are not high enough. There are signs of complacency among employees which may be causing a false sense of security that they are on track to meet important financial goals when, in reality, they are not. More than two thirds of employees who reported no stress also indicated they were not sure they were on track to meet their retirement goals. Sixty-three percent of employees who reported no financial stress do not have an estate plan in place, and 52% are not confident in the way their investments are allocated.
Liz Davidson, CEO and Founder of Financial Finesse, says this report could be identifying an important trend very early on around employees’ state of complacency which could be detrimental to employees’ future financial improvement.
“When employees grow complacent about their financial situations, they tend to ignore or forget about their long-term goals and needs,” she says. “Research has shown that there is an optimal level of stress between no stress and high stress commonly referred to as ‘eustress,’ meaning stress that is good for your mental and physical health, as well as your ability to accomplish key life goals. It is a delicate balance: too little stress and we have no motivation to overcome bad habits; too much stress and the brain and body shut down.”
Davidson is concerned that complacency could cause employees to backslide into bad habits they have made significant progress overcoming since the recession. She notes that, for the first time since 2009, the company saw a slight backslide in employees’ day-to-day financial management based on their responses to the company’s online financial wellness assessment.
“Our Think Tank is not making any conclusions about this yet—whether this is a temporary blip or signs of a larger problem,” says Davidson. “If this continues, however, employees could jeopardize the improvements they’ve made since the recession to their financial wellness.”
This has strong implications for employers, Davidson points out, due to high costs associated with having a large number of employees who have low financial wellness and high levels of financial stress. Trisha Brambley, President of Retirement Playbook, Inc., a retirement plan consulting and education firm, agrees. She adds that employers are increasingly discovering that workplace financial wellness programs are the missing piece in two key areas: First, managing health care expenses since financial stress is a leading cause of stress-related illness, and second, preparing employees for retirement by helping employees better manage their expenses they can afford to save more for retirement. “Both are major issues and both come down to an employees’ ability to effectively manage their money,” says Brambley.
Both Brambley and Davidson agree that employees’ current state of complacency could pose a risk to their ability to achieve future goals, and both firms are working on a way to increase employees’ awareness about the importance of taking care of their finances so that they are motivated to develop and sustain good habits.
“It’s great we’re seeing employees’ stress decreasing,” Davidson says, “but until we see employees’ financial wellness really reflecting that, we need to keep a close eye on their actual ability to achieve financial goals.”
Financial Finesse is an unbiased financial education company providing personalized and
innovative financial education and counseling programs to over 500,000 employees at over 400
organizations. Financial Finesse partners with organizations to reach goals such as reducing
fiduciary liability, increasing plan participation, decreasing stress, and increasing productivity
through its unique approach to financial education. Financial Finesse does not sell products nor
manage assets. For more information, visit www.financialfinesse.com.