Many of us will set resolutions as we ring in the new year, and a lot of those pledges to do better will include financial goals. Employee financial stress is expected to continue in 2023, fueled by high inflation and interest rates. Hopefully, inflation and interest rates will ease throughout the year, but even when it wanes, many prices will be higher than they were just a few years ago. A lot of people will have created new debt just to get by. As a result, the effects of current prices will continue to be felt by those who had to borrow to make ends meet.
This could be a very difficult year for many employees, and helping them get started on the right foot could make a huge difference. Many financial education programs revolve around financial products. These products are the most common way people invest for their retirement, or insure their lives or health. But there are a lot of gaps in the education available outside of typical financial products.
Cash flow is at the core of everyone’s finances. There would be no financial products without cash flow. We buy investments to turn today’s cash flow into more future cash flow. We buy life insurance to create cash flow in the case of a premature death. We purchase health insurance to cover various costs that could impact our cash flow, sometimes drastically. Yet practical cash flow education and tools are often missing from employee financial wellness programs. It seems that it’s assumed one of the most vital areas of personal finances is somehow taken care of already, even though the state of our individual balance sheets and current economic situation proves that that couldn't be further from the truth.
So what can an employer do to help their team get more life from their money by managing their cash flow more efficiently?
Think before you speak 🤔
There is a lot of shame and secrecy around money. Most people have been raised or socialized to believe that talking about money is rude. It’s also common for people to play along as though they understand various financial concepts even when they don’t, to avoid feeling embarrassed.
If you’re the owner or a leader within your organization, it’s fair to say that your team probably looks up to you. Employees who look up to you, don’t want to seem stupid or uneducated around you. Pay attention to how you talk about money, in particular, what you say about how other people spend their incomes. Ranting about how people buy too much fancy coffee, or making comments that insinuate you think people who make financial mistakes are stupid, could cause employees to recoil away from financial wellness programs.
No one wants to feel stupid or out of the loop. Opinions or inadvertent comments about people’s financial decisions that aren’t even directed at your team can still be harmful. Think carefully about how you model and talk about personal finances. It’s estimated that we’ll spend more than 90,000 hours at work in our lifetime, according to FreshBooks. That’s a lot of time for other people’s (especially leader’s) opinions about money to sink in.
Review your existing resources 🕵
If you’ve never personally invested the effort to go through all of your current financial wellness materials, now’s the time. Look carefully for resources that help employees manage their cash flow. These materials should be guilt-free. If the advice boils down to paying yourself first and making your own coffee, that’s a dead giveaway that your program is lacking what employees really need. If the publisher’s theory is that people should know better, then your employees are more likely to feel shame rather than dig in. People don’t make better choices when they feel bad.
Look for actionable strategies being taught to employees that are reasonable for current day financial management. The jar or envelope method can work for a while, but these methods generally aren’t something people can stick to for long periods of time in this age of electronic spending. You want to see methods that your employees can use with today’s financial products. Look for bank account strategies, and payment automation ideas.
You also want easy-to-use tools that allow employees to save their financial information. Tools that require your employees to re-enter their details every time they want to learn or assess a financial concept will lead to frustration, and employees could stop learning altogether.
Test new cash flow education 🧪
Upon inspection, say your current program has gaps where cash flow management belongs, or you don’t have a financial wellness program at all. Then you or someone on your team should investigate other programs with better cash flow management lessons and tools. Be on the lookout for materials that don’t criticize learners for past decisions. Instead, the program should provide easy-to-apply strategies to make the most of their situation in the future. Test out tools that are included, and see if you can easily understand how to use them.
Remember, your employees are human beings, not calculators or emotionless automatons. While we all think we make rational and logical decisions, that’s rarely the case. Even for you! We make emotional decisions, and then justify them with reason and logic after the fact. When you explore new programs, look for references to human behaviour or behavioural economics, which can provide ideas that your employees are more likely to be able to stick to.
For cash flow management strategies to work, they have to work for the person’s or family’s priorities. A list of bad or good expenses isn’t going to fit everyone. People need to understand how much they can spend on the things they control. But at the end of the day, we should be able to use our money based on our own priorities. Make sure the programs you test help your employees shape their finances in keeping with their values, rather than forcing so-called acceptable choices.
Rewards that improve employee cash flow 🤑
When you’re building compensation programs, or working on incentives related to financial wellness or other enrichment programs, think about how those benefits could enhance an employee’s cash flow. Does the reward improve their income? Or does it reduce or eliminate a common expense for your employee?
Consider comparing the net value of rewards to the types of expenses they could cover. Did you pay a $1,000 after-tax bonus to your team this quarter? In your city, perhaps $1,000 could nearly cover someone’s rent or mortgage payment, or a few weeks of groceries. Helping employees compare their extra money to the types of expenses it could cover helps them pay attention to the bonus, and think more carefully about how to use it.
This also helps quantify the impact of financial rewards or other benefits. Sometimes when we get a bonus, or even a raise, we can’t feel it; it just melds into the rest of our funds, and before we know it, we’ve spent it and didn’t even notice. Help your employees take notice of the impact of their total rewards by using comparisons to common categories of expenses.
Managing cash flow is much easier said than done, and it’s one of those things that’s never really finished. It’s not a destination; it’s an activity. We make cash flow decisions many times a day, almost every day, for most of our lives. While some seem minor, they all add up. And it’s these decisions that we make on a daily and weekly basis that can really make or break our financial futures. Give your team the tools they need to make the future they want with the cash flow they have.
CacheFlo is a financial education company that builds eLearning and tools to help financial professionals and individuals make behaviour-based changes, which allow them to get more life from their money. We want to make it easier for people to predict the impact of their financial choices before they make them.
About the Certified Cash Flow Specialist (CCS) program
CCS professionals go through enhanced cash flow-based training to develop the skill set to deliver behaviour-based cash flow advice. They start the financial planning process with a cash flow plan to genuinely help their clients get more life from their money.
About the Financial Capability Program (FCP)
The FCP combines quick and practical lessons with tools, including Winton, which helps people make financial changes they can stick to. Users can apply what they've learned to their financial situation, thus bridging the knowing-doing gap. The goal of the FCP is to help people get more life from their money.