When speaking with people about their personal and business finances I find much of an individual’s stress is caused by the unknown. As the old saying goes, “People fear what they do not understand…” Credit card debt, interest rates, the stock market, inflation, and the list goes on. Personal financial literacy and “know-how “plays a significant role in one’s ability to comprehend new information, make decisions, and feel confident about the decisions made. This leads to reduced stress and less desire for change i.e., a new job.
It wasn’t until about ten years ago with the proliferation of smartphones, social media, and mobile finance apps that an abundance of free financial resources became available at our fingertips. I volunteer for a local high school athletic program and about 50% of the boys on the team have some sort of stock market app on their smartphones. Fortunately for younger generations, social media has helped to make financial literacy “a cool thing to do”.
Exposure throughout childhood will naturally lead to greater familiarity and comfort with personal finance as this generation becomes adults. However, for those who were not exposed at a younger age, even in their twenties, financial literacy is like trying to learn French. It doesn’t matter how smart you are or how much money you make. Learning French in your forties or fifties is a lot more challenging for our brains, than in middle school French class.
Not to mention the limited amount of spare time afforded in the automotive industry, especially within the dealerships. When are we supposed to have time to learn a second language? Nights, weekends, days-off? Most people are not so naturally driven to seek and educate themselves, in their minimal time off, so they live in a perpetual state of uncertainty. Uninformed and uncertain about finances is a very difficult space to make decisions; to act.
“Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, don't sit home, and think about it…” — Andrew Carnegie
“Inaction” doesn’t bode well in the dealership. Pound the pavement! Not acting, leads to more stress and anxiety in a consistently stress-driven environment. We require knowledge (education) and confidence (experience) to make decisions and make them quickly.
Personal finance is no different.
Today, with significant increases to the cost of living, a non-stop barrage of social media news, keeping up with the Joneses, and the ease of borrowing above our means, we have more stressors about money than ever before. Financial Stress is a proven contributor to poor mental and physical health. Mental health is heavily correlated to employee performance and productivity, which has significant impacts to a company’s bottom line. SoFi, one of the largest marketplace lenders in the United States conducted a survey in 2021 stating, “Employees are spending more than 9.2 hours per week dealing with financial issues at work and 14 hours total.”
Given the impact of inflation over the past 12 months, I believe it is safe to say, this number has not decreased since 2021. When we’re stressed, we don’t think clearly, we’re in a bad mood, we lack sleep, and we’re distracted. We may still close a few deals, but peak performance, productivity, or even effort? Not likely. The result – is missed opportunities, poor service scores, lost revenues, and decreased profit margins.
The impact of employee financial stress on employers continues further. The 2023 PwC Employee Financial Wellness Survey says, “Financially-stressed employees are twice as likely to look elsewhere”. When stressed and unhappy about finances, we begin looking for a solution. But we lack the knowledge and experience to look inward at our own personal finances- spending, savings, debt, investments, taxes, etc. so by default we look outward. We look to blame others – our job, our employer
Turnover.
Turnover alone, independent of the reason, has a terrible impact financially and culturally. If you’ve spent any amount of time in a leadership or management role, you’ve experienced this firsthand. The time wasted on hiring, firing, and training leads to significant lost revenues and profits. There is no shortage of data on the topic. When we really think about it, there’s no surprise that happy, financially literate employees and low turnover will positively and profitably impact a company.
- Financial comfort/satisfaction correlates with stress/happiness
- When employees believe they are financially “comfortable/satisfied/secure,” they are less likely, to seek alternative employment.
- Financial stress/happiness correlates with employee engagement/performance
- Because employees are not expending energy seeking alternative employment, they are more engaged in their current work.
- Employee engagement/performance correlates with employee retention/turnover
- While focused on the goals/tasks/objectives of their current role, retention increases and turnover decreases.
If financial comfort/satisfaction = lower retention/turnover, how do we create/improve financial comfort/satisfaction for our employees?
Providing financial wellness services to help employees improve financial literacy and their own personal finances is one-way employers can take immediate action toward the goal of greater financial comfort/satisfaction for employees, thus leading to lower turnover.
It’s important for employers to offer these resources because the data shows employees in need of financial education and guidance are more likely to take advantage of resources provided by their employer than finding their own. Why? Individuals today have too many options leading them to “paralysis by analysis”. We don’t know which to pick. Resources offered by the employer, narrows the scope, makes the decision easier, leading to a much higher likelihood of action by the employee.
The 2022 Employee Benefit Research Institute’s Workplace Wellness Survey examines the “Effectiveness of Financial Wellness Offerings” by employers. 80-90% Effectiveness was felt across various categories including Employee Productivity and Attraction/Retention of Employees. Financial Wellness Offerings were felt to be 52% Very Effective and 38% Somewhat Effective on Employee Productivity for a total of 90% Effectiveness. Attraction/Retention was reported as 49% Very Effective and 39% Somewhat Effective for a total of 87% Effectiveness.
Data aside, financial education for your employees can impact other less obvious facets of your business. For example – If your staff had an elevated knowledge about interest rates, spending, saving, and investing – How might this impact their conversation to close the next deal? Or flip the client from a cash deal to finance? Would your staff be better equipped to serve more affluent customers when they arrive in the showroom? Would this help create a larger pool of employees for your next available management position?
Fortunately for employers, there is an abundance of companies offering these types of benefits for all different shapes and sizes of organizations at a wide range of costs per employee. Starting as low as free, to many between $50-100 per year and most under $250 per year per employee. An extremely affordable option when compared to the cost of turnover.
Stay tuned for future articles comparing workplace wellness benefits and resources companies.
