Financial literacy doesn’t translate to financial security: survey

Financial knowledge isn’t translating into financial security and wellness, finds a survey by Mercer.

While 51% of respondents say they’re knowledgeable about financial matters, more than half (also 51%) are stressed by them. Seven out of 10 say they’d have difficulty managing a financial shock and 39% state their total monthly loan payment is more than their take-home pay.

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“Something we see time and time again is financial literacy doesn’t translate into financial wellness,” said Jillian Kennedy, leader of Canadian DC and financial wellness at Mercer in Canada, in a release. “It’s a trend that spans all ages, income levels and gender. From productivity to engagement to employee health, it’s becoming increasingly important for employers to be a part of the solution in bridging wellness and literacy for employees.”

Financial wellness reaches beyond retirement security or financial literacy. Mercer research shows there are several questions that must be answered when determining whether a person has achieved financial wellness:

• Do people feel they have control over their day-to-day and month-to-month finances? Do they know what’s coming in and going out, and are they comfortable with it?
• Do people have the ability to absorb a financial shock? If they had to come up with $500 right away, could they do it?
• Are people making real progress in achieving their financial goals? Not just saving for retirement, but meeting more immediate goals such as upgrading a home or saving for a vacation?
• Do people have the financial freedom to make choices that allow them to enjoy life? For example, can they afford to travel? Can they retire when they want?

Findings also suggest while financial wellness programs are viewed as a major factor in selecting a new employer (30%), few trust their employers when it comes to financial information or advice. In fact, 40% of workers say they trust their employers, compared with 72% who trust their financial advisors.

Another recent survey found similar results, with more Canadians finding themselves without employer support when it comes to disability coverage.

It’s important for employers to find ways to foster trust and support employees’ financial wellness, especially those who need it most, including women and people nearing the age of retirement, adds Mercer.

Women vs. men

Of the women surveyed, 43% say they are knowledgeable or fairly knowledgeable about financial matters (vs. 58% of men). In addition, 67% of women surveyed are stressed about their financial situations. Tips for employers to personalize financial wellness programs for women include peer-to-peer counselling among women, and running financial wellness workshops by women advisors from outside the company.

While retirement is a topic closely tied to financial wellness, employees can’t save for retirement if they’re not financially well on a day-to-day basis. Employers need to help their workers today before they can tackle the future, says Mercer.

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“There’s no one-size-fits-all approach for employers to help their employees,” says Kennedy. “It’s important to tailor wellness programs to each companies’ workforce to drive productivity and engagement, not to mention general health overall.”

About the survey: Boston Research Technologies conducted an online survey on behalf of Mercer of 1,500 Canadian employees between the dates of May 23 and May 29, 2017. The associated margin of error for a randomly selected sample of this size is ±2.5% at a 95% confidence interval.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.