While older employees can rely on previous experience when managing their finances, many younger people are having to make important financial decisions with little financial literacy.
One such decision is whether they save for a property deposit or contribute to their pension; two options that support future financial freedom. So, in this financially challenging time, how can HR functions support younger employees and equip them with the tools to decide which to prioritise, or even better, the tools to address both?
Read more: How to create a financial wellbeing strategy
At the heart of this dilemma is a widespread lack of financial education. Many young people in the UK go through 21 years of education without ever being taught about tax, budgeting or financial options such as pensions, so it may be naive to then expect these young people to understand the importance of investing their money with their financial futures in mind.
Furthermore, based on savings of £250 per month, it takes around 12 years to save for the average first-time buyers’ deposit. When salaries are stretched, which they are for many young people, priorities often lie with the ‘here and now’ – rent, bills and groceries – rather than saving for future benefit.
Research published last year by Workhuman shows that 84% of UK workers are stressed because of the cost of living crisis and resulting money worries. However, Gen Z appears to be struggling the most according to separate 2023 research from Cigna Health. The link between mental health and productivity at work is also just as clear as the link between money worries and mental health. Mental ill-health is estimated to cost the UK economy £110 billion per year, primarily due to things like presenteeism and absenteeism.
Therefore, it’s in the interests of not only your people but your business to ensure your employees are equipped to navigate these financial challenges.
Taking ‘HR’ literally, what 'resources' are you giving your human capital to improve their financial wellbeing? Here are three things you can do:
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Break the taboo: By normalising discussions about finances, you increase the likelihood that your younger employees seek support to improve their financial resilience when they need it, thus improving their ability to save for a property deposit and invest in their pension.
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Education: Helping your younger employees understand the long-term benefits of owning property and investing in a pension, coupled with access to advice to help them budget for both effectively, is a great way to increase financial resilience.
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Benefits strategy: Could you allocate your benefits budget differently to allow you to offer financial wellbeing and resilience support to younger employees, without increasing your overall benefits spend?
Read more: Financial wellbeing: why it's time for HR to talk money
With HR departments perfectly placed to support their people’s emotional, mental, and financial wellbeing, empowering your younger employees with the tools to understand and address financial challenges should be a priority. Helping them solve conundrums like how to save for a property deposit and invest in their pension doesn’t just help reduce financial stress and increase productivity at work, it demonstrates your commitment to your people.
By Adam Burn, head of pension consulting, NFP (an Aon company)
