When it comes to financial wellness, you’d think that literacy would be paramount. After all, how can you be expected to make sound financial decisions without the right knowledge?
If global consulting company Mercer is to be believed however, courage may actually be the more important factor.
It bases this assertion on its own research, which saw it survey 3 000 US workers across a range of income levels.
According to the research, helping individuals to become more confident about engaging in financial matters is more important than employers providing benefits that focus solely on financial education.
It’s an interesting proposition, but does it undersell the benefits of a sound financial education?
The case for courage
As Mercer puts it, the case for courage in financial wellness is fairly simple: when you increase someone’s confidence, they’re more likely to engage with their own financial wellbeing and use the benefits available to them.
It also seems that a focus on courage won’t see employees take massively risky financial decisions. Instead, Mercer’s survey reveals, they’re more likely to engage with a financial advisor and seek out guidance in improving their financial wellness.
The converse, it says, is also true: where there is low Financial Courage, engagement in financial wellness programmes will be challenging.
In fact, Mercer’s research shows that employees who don’t act out of confidence are likely to avoid even talking about their financial wellbeing for fear of embarrassment.
Another consequence of low financial courage is that employees end up resorting to standard financial benefits.
Given that companies are seeing the benefits of personalised wellness offerings across the board, that’s no good for anyone.
Building courage through education
There is a case to be made, however, that education is key to building that courage. After all, if you’ve never played a game of tennis in your life, all the courage in the world won’t help when you come up against a skilled player.
In fact, if you take that approach, you’re likely to come out more frightened than ever.
Given that financial literacy rates around the globe are desperately poor, it’s clear that building courage should start with basic fundamentals.
It’s also important to note that financial education really does work.
According to one study, providing financial education can improve a person’s wealth by an amount equivalent to between 56% and 82% of their initial wealth.
Of course, while education is crucial to building financial courage, there are other factors at play. So what else can a company looking to build financial courage among its employees do?
Well, a good place to start is to measure the current levels of financial courage in your organisation.
You can do this by evaluating:
- Overall attitude toward financial matters
- Time spent at work worrying about financial issues
- Preferences around financial planning
- Self-assessment of financial planning
- Preference for control over investments versus reliance on others
Having established levels of financial courage, Mercer then suggests encouraging employees to take small, increasingly courageous steps.
Effective approaches include personalised communications that point employees to the programmes best suited to them.
Mercer also suggests providing tools like budgeting and coaching, as well as benefits like student loan refinancing, credit management, non-retirement savings vehicles and income protection to help build courage.
Holistic financial health
While it’s clear then that courage is key to financial wellness, it would be a mistake to say that it’s definitively more important than education.
Mercer’s research, tied with the research done by others on financial education, does however show that a holistic approach to financial wellness is vital.