Workforce Financial Education: A guide to understanding demographic different needs

Understanding different demographic needs

For most, personal finance is a complex subject to understand and be engaged with, despite knowing how important it is. For organisations, it is paramount to engage with employees about finance because poor personal finances often lead to poor workplace performance.

A quick reminder of what negative impacts on the workplace occurs when colleagues suffer financial stress:

• 8 % of the UK Workforce admit to taking time off work because of financial stress.
• Financial stress costs the UK economy between 120.7 billion & 17.5million lost working hours due to employee absence.
• Poor job performance is linked to poor finances.

These statistics are pre-covid; however, a recent survey showed that 43% of adults in the UK reported that their mental health had worsened since the start of the COVID-19 lockdown. This damage will be intensified now that the government’s financial buffers have ended.

Financial Education: One size doesn’t fit all

Your message must be relevant to maximise the level of engagement of your employees.

However, the one size fits all approach to financial education doesn’t work: the variety of different age groups, salary size and education levels within your organisation means a multi-stream path is best (This also can apply to employee benefits as a whole).

Whilst individual finances are unique; it is true to say that the different demographics are the best place to start, because, despite the variety of salary & education disparity, each demographic faces similar financial challenges.

This week we breakdown the different financial education needs for each group.

Financial Education: Employees Aged 18-25

• Young employees in this age bracket are in their first job after leaving full-time education. They are often the lowest-paid within an organisation because of national minimum wage boundaries, apprenticeship wages and graduate schemes giving lower pay for the promise of qualifications and future pay rises.
• Future financial provision is often at the back of the employee’s mind, working to pay for today rather than a retirement which is forty years away.
• Graduates have to deal with the prospect of repaying student debt, an average of £45k per student.
• Elementary financial education is often needed, but overlooked: for instance, 1 in 5 employees do not understand their payslip.
• Budgeting: teaching how to make a salary last until the end of the month is a skill that many young employees need.

There is a lot of learning on the job, and basic financial skills would allow employees to concentrate fully on the job. 1 in 6 workers under the age of 25 has admitted to defaulting on credit.

Using your employee benefits is a great way to make salaries go further and to introduce the subject.

Financial Education: Late 20s to mid-40s

• In their working prime, and possibly with a young family to support, they are balancing the demands and costs of childcare, rent, or mortgage payments and expenses of family life. These costs could be increasing due to a growing family, which would include;Higher household bills.
• Bigger car and fuel costs.
• Incidental costs are higher, i.e. holiday prices increase during school holidays.

With the increase in responsibility, education should ensure adequate income protection against adverse financial life events, saving for a rainy day and making retirement provisions.

Only 28% of working-aged people have some form of financial resilience through savings and life cover, the knowledge gap cuts across economic and education divisions.

Financial Education: Women & Primary Carers Pay gap

A special mention also to women who take career breaks to have a family. Women often lose out because:

• Career breaks: taking a step off the career ladder means (even with a return to work at the identical rank & pay grade) future promotions and financial compensations are delayed.
• They are returning to work with fewer hours. Often a parent returning to work will work fewer hours to continue to care for their children. Fewer hours also affect financial planning as a smaller salary means that future savings, i.e. pensions, are reduced.
• This reduced working life may last ten to fifteen years or 20-30% of a working lifetime.
• Women returning to paid work from unpaid childcare will often start in positions that are lower in status than the roles they left before they started a family.

In summary, a break in earning and saving to raise a family is often where the pay equality gap begins.

Financial Education: Late 40s onward

Employees in their late 40s onwards need to maximise their retirement provision, secure an income for later life and handle unexpected life events such as the early onset of ill health/ disability, redundancy, or the death of a partner.

Older people are much less likely to find work again following redundancy. Disability and poor health are preventing nearly half a million people, who are approaching retirement, from working.

Financial Education: Close to retirement

There is little in the way of financial education. However, pension provision becomes of critical importance. Accessing information online about the financial choices that are open can be a barrier.

Financial wellness with this age group can be tied in with basic IT skills, allowing greater control of their finances.

How can Employee Benefits Assist your employees finances?

Employee benefits will help responsible employers assist their workforce in several ways:

• Most discounts provided on platforms are inflation-beating. Used well, an employee can save on most of their financial outgoings. The My Staff Shop platform gives its users value for money (we can’t speak for other platforms!).
• Financial education: Users on the My Staff Shop employee benefits platform have access to financial education, a free 15-minute consultation with a financial advisor and an easy way to save the savings that the platform provides.
• EAP (Employee Assistance Program) will help when stress, brought on by financial worries or anything else, rear its head. The EAP is confidential and should be a resource that you can point your colleagues to.

My Staff Shop will make a difference to your colleagues. For a free demonstration or to answer any question, please get in touch.