What exactly does financial wellness mean for employers and workers?

Kevin Crain, head of retirement research and insights, Bank of America

Financial wellness looks and feels different across companies, but all programs should provide employees with the tools and confidence they need to achieve their financial goals.

The retirement business is abuzz about the benefits of financial wellness. Employees want it. And employers want to give it to them — as long as it doesn’t hit their bottom line too hard.

Sounds like a win/win situation, right?

Maybe. If only we knew exactly what it actually means.

InvestmentNews caught up with Kevin Crain, head of retirement research and insights at Bank of America, to clear up some basic questions about financial wellness and discuss what the wellness boom means for the future of retirement industry.

InvestmentNews: What exactly is financial wellness? Would you define it please?

Crain: Financial wellness at its core is the ability to manage finances for both the short and long term. However, by limiting the definition to just that, we risk discrediting some of the complexities and challenges faced when trying to achieve wellness, and the fact that the term should be personalized to the individual. Life and environments around us can change frequently and quickly, so financial wellness is not only the current ability to meet your needs and manage goals, but it’s also about having confidence and plans in place for when plans change.

It’s about understanding the resources available, utilizing employer benefits and financial experts when needed, and having realistic goals in mind that allow people to feel financially secure, now and later. In the workplace, financial wellness looks and feels different across employers, but all programs should provide employees the tools and confidence they need to achieve their personal financial goals.

IN: Why is it rising in popularity so much lately?

KC: Amid the recent economic uncertainty and increasing cost of living, employees are stressed about their finances, and this is especially true for young adults trying to balance long-term financial planning with today’s expenses. In the Young Adults and Workplace Wellness Survey, we found that almost half indicate they have outstanding student loans or consumer debt, and 49% of those with outstanding debt say that paying off debt is a greater priority than saving for retirement.

Given the financial struggles of young adults and the percentage prioritizing debt repayment, it’s not surprising only 52% are confident they can retire at the age they want. With many of these economic trends anticipated to continue this year, we can expect that the need for workplace financial wellness support will only increase.

IN: Why should employers care about financial wellness? Does it really help attract and retain talent?

KC: Employers can play a pivotal role in their employee’s financial wellness, especially when their employees do not feel financially secure or prepared. This not only helps employees, but many employers agree that financial wellness benefits improve the workplace as well.

According to our 2022 Workplace Benefits Report, 84% of employers say that offering financial wellness tools can help reduce employee attrition, and 81% say wellness tools help attract higher-quality employees. In fact, the Young Adults and Workplace Wellness Survey found that young adults value benefits when searching for jobs, with 42% selecting additional or better-quality benefits as a key differentiator in their recruitment.

IN: Can you quantify the value of financial wellness? How much does it really affect the bottom line?

KC: Given financial wellness varies person-to-person and company-to-company, it’s difficult to quantify its exact value. However, based on what we hear from employers, the value is incredibly impactful. Employers who offer financial wellness support report employees are not only more engaged and loyal to the company, but they see greater productivity and stronger employee performance, which can ultimately improve the bottom line.

IN: Are there certain financial wellness programs that employees value more than others?

KC: Every employee will have different ideas of what financial wellness means to them and what kind of support they are looking for from their employer. It’s the employer’s job to offer a wide range of financial wellness programs that employees value the most. In the Young Adults and Workplace Wellness Survey, 22% of young adults said debt management assistance, including student loan payment, and other financial assistance/planning benefits are desired wellness benefits. This was even more prevalent among young adults with outstanding debt, with 33% indicating debt management assistance programs are a desired benefit.