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mily Trant, chief impact officer at Wagestream, a workplace financial wellbeing app, said that worrying about bills, having to handle unexpected expenses and fearing the
next rise in housing or fuel costs can affect the cognitive performance of colleagues and their ability to work at their best. Speaking at the CIPD conference and participating
in the discussion on ‘How behavioural science can level up your FinWell strategy’, she described how studies show that chronic financial stress can diminish cognitive function by up to 13 IQ points. “Financial and mental health issues are affecting a
significant proportion of the workforce and it affects their wellbeing and performance,” she said. “Employees not only need this support, but they expect it.”
WHAT IS FINANCIAL WELLBEING & WHY DO WE CARE ABOUT IT AT WORK? One issue around financial wellbeing is that it is difficult to measure. Emily Trant used the definition from the Money and Pensions Service (MAPS), an organisation sponsored by the Department for Work and Pensions in the UK. It defines financial wellbeing as: “Feeling secure and
in control, being able to make the most of your money day to day, being able to manage something unexpected and be on track for a healthy financial future.” “Feeling secure is subjective among people even
with the same bank balance,” she explained. “Making the most of your money day to day is about finding joy in life, finding pleasure, having your money work for you that allows you a quality of life that feels good to you. Managing something unexpected, whether that is an income shock or an expense shock, is about having the resilience to cope with it and having it not blow you off course. There is a trade-off between then and now to ensure that you are in a really good place today, but making sure you are in a good place tomorrow.” Acknowledging that financial wellbeing is subjective
and differs from person to person, she said that as well as “being altruistic and caring about our people”, employers should act because the cost of presenteeism – of people not fully engaging at work – is estimated at £24 billion in the UK. “That might be because of physical health, financial
health or mental health and it equates to 2 hours 36 minutes of productive time per person per day when they are not fully showing up,” she said. “In addition, when you are suffering from financial
stress and carrying the cognitive load of worrying about money, constantly thinking and worrying about your finances, that costs you 13 IQ points. That is not an insignificant figure. It is the difference between average intelligence and superior intelligence. “Financial stress is when you’re carrying that load,
thinking about money, worrying about money. Can I pay that bill? Should I pay it late? Have the kids grown out of their school shoes already and what’s going to happen at Christmas time? What if fuel prices go up even further? Thirteen IQ points is the cost of that constant thinking
and learning and managing and juggling. That is the effect of carrying financial stress.” She said that the unconscious effort of constantly
thinking and juggling also affects your executive function and your impulse control, so you make worse decisions. “You’re more likely to shout at a family member or a
friend or a colleague and make worse money choices,” she said. “You do things that are not productive for your overall financial wellbeing. You make mistakes when it comes to patient care. You make mistakes at the till. It really affects your whole life. Imagine if you could lift the productivity of your workforce by two hours and 36 minutes a day and if you could lift their IQ by 13 IQ points.”
THE EMPATHY GAP BETWEEN SENIOR LEADERS & EMPLOYEES Wagestream’s report, The State of Financial Wellbeing 2024: How leaders shape FinWell in the workplace, explores how financial wellbeing is experienced and understood in the context of the workplace. The 2024 report, produced with behavioural science consultancy CogCo and written by Emily Trant and Owain Service, CEO of CogCo, explores the dynamic between senior leaders who govern financial wellbeing in the workplace and their working populations. The survey found an “empathy gap” between high earners and low earners:
• Higher earners underestimate the financial savviness of lower earners: Higher earners substantially underestimated how well lower earners are managing their money. While they make good predictions in a couple of basic areas – grocery spending and money left at the end of the month – they are wildly out of tune with how this translates into financial resilience and social outcomes.
• Higher earners predict that three times more lower earners are missing out on social activities, that they save a third as much as they really do, that they would survive less than half as long if they lost their main salary and that they worry about money twice as much as in reality.
• This empathy gap is particularly important because every single business decision-making role is in an income bracket that is higher than the UK median (£34,963). A minority of higher earners make all the decisions that affect the majority of the workforce and yet they struggle to understand their true circumstances.
• The gap is particularly stark when we look at savings: Lower earners have a median savings balance of £3,000, but for higher earners it is £25,000. With four times more money left at the end of the month, higher earners accumulate more than eight times the savings of lower earners.
• Higher earners have more resilience should the unexpected happen: Lower earners report being able to get by for a median of 75 days if they lost their job; for higher earners this was 180 days. Despite higher spending, higher earners still have more resilience when it comes to meeting their core costs.
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GLOBAL LEADERSHIP SUPPLEMENT
FINANCIAL WELLBEING
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