The UK Strategy for Financial Wellbeing from the Money and Pensions Service sets out how to boost financial wellness by helping people to budget, learn how to avoid getting into financial difficulty, and create savings. It is taking a many-pronged approach focussing on:
• Laying down firm financial foundations by educating children and adults about money
• Giving people access to more affordable credit
• Providing people with better debt advice
• Encouraging people to plan for later life
• Creating a nation of savers.
The strategy sets out some ambitious goals, starting with better financial education for children and adults so that they learn how to manage their money better and how to live within their means. Everything flows from that. It’s vital also to focus on debt management and measures to combat poverty and pay gaps, given that so many of us are struggling between pay days and falling into debt.
It’s often easy to overlook that, as well as the need to manage our money better day to day, it’s essential to our wellbeing to save too. Good financial management says we should set aside a percentage of our salary for savings before we start spending.
There is a lot of good quality guidance encouraging us to save before we spend, because if we try to do it the other way around, we never save a penny. Pre-planned savings become a reality and once we start saving, it becomes a positive habit.
How much you should save depends on your savings goals. Publications on financial wellbeing will suggest anything from 5-15% of your salary, which should then be split between creating a pot for rainy days and investing in assets that can provide an income in future to help with retirement planning. Of course, if you’re struggling to make ends meet already this might seem like a pipe dream, but if you can even save a little, it’s important to do so.
Saving for a rainy – or sunny - day
You might be forgiven for thinking that debt causes us the most issues with our financial wellness - but the absence of savings is a significant detractor from financial wellness and conversely, the existence of a savings pot for emergencies greatly increases our financial resilience.
So, it’s incumbent on employers to help and encourage employees to save. But how can they do this?
There are several ways for employers to promote savings amongst employees, including providing financial education and access to financial and pre-retirement advisors. They can also look at more innovative ways to encourage their employees to save before they spend. Some of the most innovative ways are built into PayCaptain which combines payroll with banking.
PayCaptain allows employees to have money paid into more than one account, making it easier to save - and to pay bills and have enough spare money to live on for day-to-day expenses. Money can be automatically transferred from wages into a savings account every month encouraging people to save first.
PayCaptain’s unique “Flexible Payments” allow employees to choose exactly where, when and how they receive payments like bonuses, rewards and expenses, again making it easier to save and to minimise the risk of spending rashly.
Another benefit is that employers can encourage their employees to save by incentivising them to maintain a savings balance or by matching employee savings payments (like pension contribution matching).
These are options that employers might not have previously considered but the financial arguments in their favour are strong. Financially healthy and resilient employees are likely to mean higher performance and productivity, reduced absenteeism, lower employee turnover and increased employee engagement.