What Decreased Spending During Covid-19 Means for Financial Wellbeing of Workers: How Employers Can Respond

Whilst most of the news we’ve been seeing about the Covid-19 crisis over recent months has focused on the adverse impacts of the virus on our health and wellbeing, once in a while we see news reported on positive outcomes.

Such as the positive side of families spending more quality time together, the air we breathe being less polluted, reduced stress with people not commuting to work, etc.

A report by global debt collection agency Intrum also highlights both the positive and negative impacts of the pandemic on financial wellbeing, and what this means for employers.

Tough financial times for most

These are undisputedly challenging financial times for individuals, companies and governments alike, across the world. In terms of individual finances, Intrum’s Europe-wide survey indicates that:

  • 39% of people are saving significantly less for the future than they were before Covid-19
  • 58% of people reporting they’re dissatisfied with their ability to save each month
  • 48% say their financial wellbeing has declined compared to six months ago

Investment brokerage TD Ameritrade in the US has similarly reported the net household budget of 4 in 10 Americans has been negatively affected by the Covid-19 pandemic and 60% of Americans say their emergency savings will last three months or less—undoubtedly adversely impacting on people’s sense of financial wellbeing.

But.. financial wellbeing is also improving for some

With economies across Europe and North America virtually shutting down as a response to the pandemic, consumers’ ability to spend and consumer spending patterns have been significantly disrupted. There’s been a fall in spending across all industries due to the closure of public businesses, transport and the suspension of air travel, reported the World Economic Forum.

As a result, TD Ameritrade reveals significant savings by Americans:

  •   75%, by not going on vacations or trips
  •   78%, by not eating out
  •   64%, by not attending sports or music events
  •   62%, by not paying for childcare
  •   55%, by not commuting

82% of Americans have reported that the pandemic has helped them realise that you don’t need to spend a lot of money to have a good time and 63% reported the pandemic helped them get more in touch with their finances.

Intrum’s European consumer survey found that while the Covid-19 crisis increased financial pressure on the majority of consumers, financial wellbeing has improved for a select group of consumers having reduced their ‘non-essential’ spending, such as on tourism, clothing and dining. Over a third (36 percent) of European respondents said the pandemic has had a positive impact on their financial spending.

For those who are now able to save, what next?

For the consumers still employed through the crisis who’ve been able to save, although restrictions are now lifting many of us are feeling conservative about going back to old spending habits with financial uncertainty still looming. Having a sense of job and financial security is not what it was before in any economy, nor our sense of financial wellbeing (despite some faring better than others).

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In this recent article for Make A Difference News, financial wellbeing is defined as: “A sense of security and feeling as though you have enough money to meet your needs. It’s about being in control of your day-to-day finances and having the financial freedom to make choices that allow you to enjoy life.”

Employers can play an important role in helping workers to sustain a sense of financial wellbeing or security who are in a position to save now. But of course doing so alongside supporting staff who may be struggling financially at home due to being on furlough; reduced hours; loss of income of a partner; loss of investments, etc as a result of the health and economic crises.

What employers can be doing to support financial wellbeing

Intrum reported that more than a third of its European survey respondents did not understand basic financial terms such as ‘budget’ and ‘credit score’. Access to financial education will be central to easing people’s anxieties as they continue to feel the impact of the Covid-19 crisis. But people aren’t often so motivated or informed on how to access financial education.

Whist organisations can’t help ease all Covid-19-related anxieties their workers will face, they have every reason to want their employees to be financially sound. So providing financial education makes sense. In its approach to supporting companies with financial wellness programmes for staff, Mercer lists reasons for employers to invest in such programmes:

  • Bolsters company productivity when employees aren’t distracted by financial worries.
  • Drives more predictable workforce flow throughout the organisation.
  • Results in improved physical health (people with high levels of financial stress are more prone to sickness).
  • Increases employee engagement & retention.
  • Creates more affordable retirement opportunities for all employees & enables career advancement opportunities for younger employees. 

Mercer’s programmes, for example, specifically focus on helping staff to:

  • Have control over day-to-day finances: Learning how not to overspend income & ensure debt & expenses are manageable.
  • Be prepared for the unexpected: Have the capacity to absorb a financial shock.
  • Have freedom to make choices in life: Including access to resources & financial guidance & advice to make better financial decisions.
  • Be on track for the future: Have a plan for the future & saving towards it. 

There are now also countless Fintech solutions available offering employers a range of digital tools to support financial wellbeing of workers. 

In the Covid-19 recovery period, it’s arguable that staff will continue spending less, being creative with having fun with less money and trying to save more whilst many uncertainties still pend for the world’s economy. 

And staff will likely be more engaged in taking advantage of financial wellness offers by their companies—to educate themselves on how best to be in control of day-to-day finances and their financial futures. And thus reducing personal finance-related stresses whilst working, which is to the employer’s overall benefit.

The bottom line for employers is: if you’re not yet providing financial wellbeing support for staff, it’s an investment worth making for the wellbeing of the company—and your people. We all want to feel ‘safe’ to start enjoying a sense of security—to start enjoying life again.

See Intrum’s full report here.

See TD Ameritrade’s full report here.

 

About the author

Heather Kelly is the founder of Aura Wellbeing, a consultancy providing workplace wellness strategy, coaching and training services to employers. She’s also Content Director for Make a Difference Summit US and Online Editor for Make a Difference News. Heather led the development and operation of the Workplace Wellbeing Index, during her time working for the UK’s largest mental health charity, Mind. In her earlier career she worked as a photographer, a journalist and a senior manager in the insurance industry. She’s passionate about inspiring more empathy and awareness in workplaces toward normalising mental health and in her spare time Heather teaches photography to teens as part of a charity projects in London and Spain, she’s an avid runner and experimental chef for recipes promoting healthy minds.

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