Just as there are proven tools and methods for getting tothe root of a dental problem and restoring a healthy smile, thereare proven ways to get employees to a happier and healthier placefinancially. (Photo: Shutterstock)

How are your employees doing financially? If making workershappy and healthy is on your radar, one of the main ways to makethat happen is by helping them take control of their money.

There's a lot of confusion about real financial wellness. Some programs focus onhelping workers with student loan refinancing and payday advances.Others hype the convenience of all kinds of payroll deductions.About the only thing most people agree on is that employees needsome kind of help managing their money.

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Actually, it's a lot worse than needing a little help. MostAmericans across all income levels are totally unprepared for smallbumps, let alone retirement. And most of the programs aimed atfixing the problem are failing.

The good news is that a few companies are helping employees takecontrol of their money. Many are even seeing participation andsavings rates climb in the 401(k)!

The key is behavior change. Unfortunately, there's a trendaway from changing behavior and toward making people comfortable.It's being promoted under the deceptive name of financialflexibility.

How financial flexibility hurts employees

Most financial wellness programs fail because they only focus onfinancial toothaches like debt management or the timing of payaccess while doing basically nothing to solve the deeper problem ofbad financial behaviors. A shallow approach can only provide alittle relief at best; it does nothing to solve the root issue. Infact, the longer employees put off addressing the real behaviorscausing the symptoms, the worse their long-term prospectsbecome.

Financial flexibility waters down what it really means to befinancially well and puts the emphasis on making employeescomfortable. That's crazy. It's like a dentist who only numbs hispatients' teeth but will never drill into a cavity. Sure, thecustomers are comfortably numb for a while. But in the end, theyare at risk of major problems. The same danger comes up in thefinancial wellness space.

What's scary is how this is becoming a selling point for someprograms. We are hearing voices in the marketplace that literallywant to redefine financial wellness away from long-term behaviorchange and toward what's called financial flexibility. “Just helpemployees get comfortable with paycheck living,” they say, “becausethat's the most anyone can expect in today's economy. If you canhelp them worry a little less, they'll be happier employees.”

Just as there are proven tools and methods for getting to theroot of a dental problem and restoring a healthy smile, there areproven ways to get employees to a happier and healthier placefinancially.

To help distinguish real financial wellness from inadequate“flexibility” offerings, let's look at some of the popular butharmful ways this is showing up in employee benefits.

Student loan refinancing

We're hearing more every day about programs that try to fix anemployee's financial picture by helping them pay back or refinancetheir student loans. It may sound flexible, but it's not going tomove the needle on financial wellness long-term. I'll agree thattreating loan payments like a 401(k) and offering a match is agreat move. It's a generous way for employers to provide real helpin getting employees out of debt. But refinancing just causes afalse sense of having done something and puts off real action. Itcan also mean the loss of key federal protections on existingloans.

Focusing on student loans as if they were the main culpritmisses what employees really need. Are student loans a problem formany employees? Absolutely. But they're not the main issuepreventing action in a 401(k).

The real issue is that employees lack a plan to get after theirdebts and eliminate them fast enough to get ready to invest. Andthat means they need to be convinced to change bad habits. Thinkabout it. Even if a company could afford to write checks to pay offall its workers loans (dream with me), what would be the point?Sure, it would feel great for a while, but in the end bothemployers and employees would end up broke. And the lesson learnedwould be that the issue isn't really income or employermatches—it's behavior!

Payday advance programs

Flexibility type programs have also pushed for letting workersaccess their pay instantly instead of waitingfor a paycheck in two weeks. The reasoning is somewhatunderstandable: It supposedly protects them from paying highinterest rates at a payday loan provider and hopefully also helpsthem avoid late fees on bills.

It doesn't work that way in practice though. It should be notedthat there are still fees associated with these programs, andthey're either paid by the company providing the benefit or, moreoften, by the employees themselves. This is either falseadvertising by the benefit program or a way of shifting cost to theemployer.

But that's not the main problem with these programs. The worstpart is the way they reinforce the bad behavior that gets employeesin financial trouble in the first place: spending everything theyearn and failing to make a long-term plan. Changing the date ofpayday by a few days is pretty pointless because bad behavior isjust as bad on Tuesday as it is on Friday.

Automatic solutions and payroll deductions

Some vendors are also peddling programs that try to sellcompanies on making everything easy and convenient for employees onpayday. It's almost as if making money more thoughtless is the goalof the benefit! It includes things like automated savings, employeepurchase programs and bill pay. The idea is that if you can getenough automatic deductions in place, workers won't even have tothink about their money. Bills will be paid, money will be savedand certain purchases can be covered (at a discount!) at the pushof a button!

Sounds great right? But it's really like yelling, “Alexa, fix mymoney,” into your living room and thinking it will make you rich.While I do believe that enrolling in auto programs can helpemployees who already have a clear long-term plan, most simplydon't have one. And lacking a plan, auto measures will just putfinancial goals out of their minds. The problem is those automatedefforts don't lead to much financial improvement for mostemployees. They've been tried, and most who use them remain livingpaycheck to paycheck, saving very little for emergencies orretirement. There's not much intentionality, and as a resultthere's little authentic behavior change.

Big financial institutions

Another big player in the space: large financial institutionslike banks or insurance companies that try to sell your employeestheir financial products. They can be tempting because many ofthese options are offered free or at an incredible discount. Theopportunity to save money and help your employees at the same timecan seem irresistible. But this is one free lunch you need to passup.

It's not the sales pitch that concerns me. It's the sleight ofhand, telling your business they want to help your people get inbetter shape financially when what they're really looking to do ispush their products to a captive audience. The problem is theseprograms mostly feature tools without any real inspiration tochange behaviors. That's not going to do a thing to change theirfinancial outcomes in the long run. In fact, they often includesolicitations for really bad products like credit cards or mortgagerefinancing. Debt is not financial wellness, not even “cheaper”debt than what you're already carrying.

Real financial wellness starts with behavior change

Going with financial flexibility in the hopes of helping workersis an understandable but dangerous choice. By opting for “comfort,”many programs are confusing the symptoms of financial trouble(ongoing debt, paycheck living and nonexistent 401(k)participation) for the underlying problem. Or they're pretendingthe real problem isn't even there.

Deep down, the real problem is a misunderstanding of the truepurpose of money. Instead of seeing that the whole point of earningmoney is to build wealth and gain real financial independence, manyemployees limit their thinking to what money can do for them today.There's no longer-term plan, so there's ongoing risk of a financialdisaster stemming from financial emergencies.

Most Americans are living like they believe the dream offinancial independence is dead and gone. What's tragic is that manyfinancial wellness programs are taking their cues from the badfinancial behaviors of the masses.

To build real and lasting financial wellness, your workers needa long-term plan that does these things: identifies bad moneyhabits and why they don't work; points toward clear and healthyaction steps for better wellness; inspires them to put thelearnings into practice; and has real results. Many people in thefinancial wellness space claim to deliver these benefits, but mostdon't have the results to prove it. When behavior change aroundmoney happens, the payoff doesn't stop at the employee's wallet. Itspreads throughout any company where employees are gaining realfinancial wellness.

Brian Hamilton in vice president ofSmartDollar, a financial wellness program from RamseySolutions.