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

There's a lot of confusion about real financial wellness. Some programs focus on helping 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 need some kind of help managing their money.

Actually, it's a lot worse than needing a little help. Most Americans across all income levels are totally unprepared for small bumps, let alone retirement. And most of the programs aimed at fixing the problem are failing.

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

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

How financial flexibility hurts employees

Most financial wellness programs fail because they only focus on financial toothaches like debt management or the timing of pay access while doing basically nothing to solve the deeper problem of bad financial behaviors. A shallow approach can only provide a little relief at best; it does nothing to solve the root issue. In fact, the longer employees put off addressing the real behaviors causing the symptoms, the worse their long-term prospects become.

Financial flexibility waters down what it really means to be financially well and puts the emphasis on making employees comfortable. That's crazy. It's like a dentist who only numbs his patients' teeth but will never drill into a cavity. Sure, the customers are comfortably numb for a while. But in the end, they are at risk of major problems. The same danger comes up in the financial wellness space.

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

Just as there are proven tools and methods for getting to the root of a dental problem and restoring a healthy smile, there are proven ways to get employees to a happier and healthier place financially.

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

Student loan refinancing

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

Focusing on student loans as if they were the main culprit misses what employees really need. Are student loans a problem for many employees? Absolutely. But they're not the main issue preventing action in a 401(k).

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

Payday advance programs

Flexibility type programs have also pushed for letting workers access their pay instantly instead of waiting for a paycheck in two weeks. The reasoning is somewhat understandable: It supposedly protects them from paying high interest rates at a payday loan provider and hopefully also helps them avoid late fees on bills.

It doesn't work that way in practice though. It should be noted that there are still fees associated with these programs, and they're either paid by the company providing the benefit or, more often, by the employees themselves. This is either false advertising by the benefit program or a way of shifting cost to the employer.

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

Automatic solutions and payroll deductions

Some vendors are also peddling programs that try to sell companies on making everything easy and convenient for employees on payday. It's almost as if making money more thoughtless is the goal of the benefit! It includes things like automated savings, employee purchase programs and bill pay. The idea is that if you can get enough automatic deductions in place, workers won't even have to think about their money. Bills will be paid, money will be saved and certain purchases can be covered (at a discount!) at the push of a button!

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

Big financial institutions

Another big player in the space: large financial institutions like banks or insurance companies that try to sell your employees their financial products. They can be tempting because many of these options are offered free or at an incredible discount. The opportunity to save money and help your employees at the same time can seem irresistible. But this is one free lunch you need to pass up.

It's not the sales pitch that concerns me. It's the sleight of hand, telling your business they want to help your people get in better shape financially when what they're really looking to do is push their products to a captive audience. The problem is these programs mostly feature tools without any real inspiration to change behaviors. That's not going to do a thing to change their financial outcomes in the long run. In fact, they often include solicitations for really bad products like credit cards or mortgage refinancing. 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 workers is 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 pretending the real problem isn't even there.

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

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

To build real and lasting financial wellness, your workers need a long-term plan that does these things: identifies bad money habits and why they don't work; points toward clear and healthy action steps for better wellness; inspires them to put the learnings into practice; and has real results. Many people in the financial wellness space claim to deliver these benefits, but most don't have the results to prove it. When behavior change around money happens, the payoff doesn't stop at the employee's wallet. It spreads throughout any company where employees are gaining real financial wellness.

Brian Hamilton in vice president of SmartDollar, a financial wellness program from Ramsey Solutions.

Instant Insights /

Financial flexibility falls way short of real financial wellness

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