Workplace Financial Coaching Has Become Ever More Important

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“I read the news today (oh boy).”

These iconic opening lyrics from The Beatles song “A Day in the Life” resonate as much today as they did in 1967. In today’s rocky economic environment, elevated interest rates, high inflation and slow wage growth have contributed to historically high levels of financial stress, low feelings of financial wellness and a steady depletion of pandemic-era savings.

In a time of growing individual financial responsibility contrasted with a rapidly changing financial landscape, the importance of workplace financial coaching has never been more significant. As employees navigate complex financial decisions, from managing debt to saving for retirement, the role of employers in providing financial education and support has evolved into a crucial component of the modern workplace.

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The changing economic landscape

The global economy is in the midst of a decades-long transformation, with some of the biggest fractures exposed during the pandemic and haunting us through today. The traditional job security of previous generations has given way to a gig economy characterized by temporary and freelance work — leaving many workers without traditional employment benefits like retirement plans or health care coverage. The pensions of old have also given way to retirement plans, employer-sponsored or not, where the onus of contributing and saving is on the individual.

Complicating the issue, financial markets have also become more complex. From cryptocurrencies to intricate investment instruments, the average person is now confronted with a multitude of choices that can significantly impact their financial well-being.

So while individuals bear greater financial responsibility in this new economic reality, they are also expected to navigate a higher level of complexity. Workplace coaching can fill the gap by arming employees with guidance, education and a stronger understanding of personal finance.

Changing employee expectations

The modern workforce increasingly values employers that offer more than just a salary — employees seek comprehensive benefits packages that support their financial well-being. As a result, businesses are under pressure to attract and retain talent by offering more holistic employee support.

Workplace financial coaching addresses this demand by offering a range of benefits. Firstly, it helps employees reduce stress and anxiety related to their financial situation, which the American Psychological Association reports is a top stressor across the country. When employees are worried about money, their job performance and overall well-being can suffer.

Secondly, financial coaching aids in retirement planning. With the responsibility for retirement funding shifting to individuals, employees need assistance in negotiating retirement accounts, investment strategies and risk management.

Lastly, financial coaching supports responsible debt management. Many employees grapple with student loans, credit card debt and mortgages. Understanding how to manage and reduce debt can lead to improved financial stability.

By providing financial coaching benefits, employers can mitigate their workers’ financial stress, alleviate burdens and equip them with the knowledge and tools to make informed decisions about their financial future — leading to happier, more productive workers.

Broader societal implications

The benefits of workplace financial coaching transcend individual employees and directly influence society at large. When employees are financially secure, they are less likely to require social safety nets, such as unemployment benefits, food assistance and housing subsidies. Reduced dependence on these programs lightens the financial burden on taxpayers and government resources.

Moreover, financially secure individuals are more likely to make responsible financial decisions that benefit the people around them. They can invest in education, contribute to local economies and support community initiatives — fostering individual well-being, but also contributing to the economic growth and stability of the nation.

Workplace financial coaching also addresses the growing wealth gap. As individuals acquire the knowledge and skills to manage their finances more effectively, they are better equipped to accumulate wealth and build financial security. This narrowing of the wealth gap will reduce economic disparities across the board and lead to a more equitable society.

Challenges and implementation

While the benefits of workplace financial coaching are numerous, implementation must be done right. Employers need to ensure that coaching programs are tailored to meet the diverse financial needs of their employees. A one-size-fits-all approach may not be effective, as different individuals may face unique financial challenges.

Moreover, financial coaching programs should be accessible to all employees, irrespective of their income level. It is crucial to avoid creating a situation where only higher-income employees can access valuable financial guidance or being seen as targeting a specific at-risk population at the exclusion of others.

Additionally, the effectiveness of financial coaching programs needs to be measured and adjusted over time. Employers should regularly assess the impact of these programs on employee well-being and financial literacy, making the necessary improvements and modifications.

Workplace financial coaching is more important than ever

Workplace financial coaching addresses the challenges of a rapidly changing economy on so many levels. Where employees are empowered to make informed financial decisions, employers can attract and retain talent and reduce financial stress among their workforce. At a larger scale, this workplace benefit contributes to a more equitable society.

As the world navigates an increasingly complex financial landscape, workplace financial coaching stands as a vital tool for fostering individual and societal prosperity.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Greg Ward, CFP®, is the Director of the Financial Wellness Think Tank at Financial Finesse, where he oversees industry-leading research on financial wellness best practices and trends, looking at both the workplace environment and employee sentiment. Recent examples include studies on the shifting financial priorities of Millennials and Gen Z and longstanding racial financial wellness and wealth gaps.