How does financial health impact the mental well-being of employees?

Leaders and organizations often tend to focus solely on mental health initiatives, neglecting the significant impact of financial well-being on employee mental health. However, a recent study has delved into this correlation, shedding light on how financial stressors can impact employee engagement at work.

Researchers at the TIAA Institute have found that financial challenges, such as concerns about debt, financial instability, or the inability to meet basic needs can trigger stress or reduce resilience against mental health challenges. They highlight that significant debt is frequently linked to feelings of anxiety, depression, and frustration, while ongoing financial hardships may contribute to feelings of hopelessness and despair, potentially leading to depression. The study was conducted by the TIAA Institute, a division of the financial services provider Teachers Insurance and Annuity Association of America (TIAA) and High Lantern Group.

"The pandemic has heightened awareness about the prevalence of mental health challenges, with rates of poor mental health rising. Organizations should openly discuss mental health to help break down the stigma, and importantly take a leadership role in addressing this defining issue of our time," said Claire Borelli, Chief People Officer, TIAA.

As per the findings, 42% of adults in the US report that money negatively impacts their mental well-being, and financial stress has resulted in a 34% increase in absenteeism and tardiness. Financially strained employees are five times more prone to distractions by financial worries during work hours. Additionally, they tend to miss approximately twice as many workdays each year compared to their financially secure colleagues.

"We live in a world in which greater numbers of people are increasingly struggling to create financial health. And one of the biggest drivers of mental health is a person's sense of financial stability," said Tara Giuliano, Chief Marketing Officer, Nuveen.

Poor mental health can also impair an individual's cognitive capacity for evaluating options and risks when making key financial decisions – resulting in impulsive spending, poor financial planning and increased vulnerability to stress induced by short-term financial decisions. Among those facing mental health challenges: 93% felt they spent more than usual, 92% found it harder to make financial decisions, and 56% took out a loan they otherwise would not have.

According to the World Health Organization (WHO), over 1 billion people or 12% of the population live with a mental health condition, and only 47% of them received mental health services in the last year.

Researchers say creating a holistic employee support framework that address both mental and financial well-being of employees may help to improve workplace productivity, employee engagement, and overall wellbeing. Successfully developing such a comprehensive framework requires a holistic and integrated approach, recognizing the diverse needs of employees across different levels and departments within the organization.

The report outlines specific strategies for employers to deploy impactful mental and financial health interventions.

1. To effectively support employees' financial and mental health, employers must first understand their needs and perspectives.

This involves recognizing that employees' challenges vary both within and between organizations. By gaining insight into the demographics and backgrounds of their workforce, including socio-economic factors, employers can better tailor support programs. Understanding common financial liabilities such as student loans, high cost of living, medical expenses, childcare costs, eldercare costs, or other obligations allows employers to prioritise areas of support or counseling effectively.

2.Offer accessible services that seamlessly connect mental health and financial wellbeing.

Employers can alleviate employee concerns about financial barriers to mental health care by clearly communicating how benefits, such as therapy and medication, can be accessed with minimal or no financial obligation. Additionally, offering financial education programs like debt management, budgeting workshops, and retirement planning can help employees manage their finances effectively. These programs should be accompanied by mental health promotion messaging that acknowledges the stress and anxiety often associated with financial concerns.

3. Encourage the sharing of practical knowledge and resources.

Creating employee resource groups and other platforms dedicated to sharing knowledge, particularly on mental health or common experiences like grief, parenting, or caregiving, fosters peer support and connections to resources. This promotes a sense of community within the workplace and enhances awareness of available free or low-cost services and support provided by the employer or within the community.

4. Support the whole person.

Taking a proactive approach to address and support employees' needs across traditional benefit and support “silos” enables a more flexible and personalized approach.

?Creating a positive employee experience, characterized by flexible work arrangements and a balanced workload with clear expectations, can notably alleviate stress and enhance mental health. This approach empowers employees to effectively manage both personal and professional obligations within their current circumstances.

?Investing in employees' professional development signals a commitment to their growth within the organization, boosting job satisfaction and easing anxieties about job security and career advancement. Aligning future career planning with employees' financial health fosters a stronger sense of connection to the organization and reinforces their value in their role.

?Offering benefits that cater to employees' goals beyond the workplace, such as student loan repayment assistance, home-buying programs, savings plans for children's education, or emergency financial support, can prevent external financial stressors from impacting employees' mental health and, consequently, their work performance.

?Just as mental health priorities can change, so can financial health needs. Providing support across a spectrum of needs, from comprehensive assistance to basic financial literacy and preventative mental wellness programs, is essential for nurturing a resilient and adaptable workforce.

ENDS//