Revealed: Top three financial wellness myths causing unnecessary hardship

Are your employees in the dark when it comes to these common misconceptions?

Revealed: Top three financial wellness myths causing unnecessary hardship

Now more than ever, financial wellness is a top priority for many employees.

Where once the prospect of a sudden significant shift in finances was a fleeting concern, for many workers the pandemic has driven home just how quickly circumstances can change.

We know financial insecurity increases stress among employees and causes a hit on their productivity in the workplace.

So how can employers equip their staff with better financial education?

Speaking to HRD, Angela Vale, CEO at Footprint Connect, said setting workers up with the knowledge and tools to become financially savvy should be a priority for all employers.

Often, financial education covers topics like debt management, budgeting, and saving skills, but Vale said many stop short of estate planning – something most commonly associated with retirees.

This misconception can create untold stress for employees during periods of emotional stress, so debunking the following financial wellness myths is a good place to start.

  1. ‘Estate planning is a retirement discussion – I’ll think about it in the future’

Vale said this mentality among young people has to change if we want to shift the dial on financial wellness.

“There is a misconception around what estate planning is,” she said. “A lot of people think it’s only a retirement age discussion when actually, that can trip them up in so many ways”.

“Because it is put off as a retirement issue instead of a today conversation, people are often looking at their financial wellbeing as separate pieces."

Read more: Improving financial wellness: Seven steps to getting ahead

People tend to break up their financial assets, such as a loan from the bank, their superannuation, or their share portfolio, rather than looking at how each part contributes cumulatively to their estate.

“All these decisions you’re making today contribute to your personal estate and so therefore, the way you set up your bank account for example will significantly impact your estate,” she said.

This decision around banking is particularly important for couples who do not set up a joint account.

“If you or your partner were to pass away unexpectedly and you’re both living out of one person’s account rather than a joint account, the funds in that account will be frozen,” Vale explained.

“You wouldn’t have access to the money you’re using to live on until the estate is settled.

“If there is a will in place that’s great, but it’s still going to take six to 12 months before you can get access back.

“Can you stop living out of your account for that amount of time? If there is no will in place, it’s even worse and could take up to 18 months”.

“That can create a lot of hardship and yet that is not discussed at the point of opening an account because there is no-one talking about estate planning.”

The prospect of funeral bills, extreme emotional stress and then added financial worry if a will is not in place all contributes to incredible levels of hardship for someone experiencing the loss of a partner.

Read more: 70% of employees worry about money at work

This financial hardship can be reduced by putting measures in place now, but only if we end the myth around estate planning and reframe it as a today conversation, rather than a retirement issue.

“We will start to turn around financial resilience once we understand what makes up our estate and how all our financial decisions work together and impact us from the day we open a bank account,” Vale said.

  1. ‘I’m too young to need a will’

Like estate planning, another key misconception is that a will is only necessary for the older generation.

Vale said people aged 25-40 are in the highest levels of debt ever seen and yet, they are the most underwilled group.

“If we say the majority of people in that age bracket are in coupled situations. The loss of an income can lead to an increased level of debt and increased financial hardship, especially if there is no Will in place she said.

Without a will and the prospect of frozen funds, people may resort to mortgage holiday or personal loans to top up financially, in turn leading to yet more debt.

While young people are often schooled in the advantages of budgeting and investing, Vale said “missing out this extra piece is far more impactful and is the wrong way of thinking”.

Instead, employers should be striving to give their workers access to learning from their first point of employment, so they can understand and become confident in each facet of financial wellness.

But without the right tools and knowledge, financial myths perpetuate, increasing the prospect  of reduced financial resilience when it’s needed most.

While many employers do offer financial education initiatives as part of their offering, Vale said it’s also about making people – especially younger employees – aware that being financially resilient is important at any age.

  1. ‘After my death, my money will automatically go to my partner or children’

It’s another common misconception, Vale said, but in reality, the process is far more complicated without a will in place.

For an estate over $15,000, the family will have no legal right to decide who will receive certain assets, unless a will is in place.

For estates over that monetary threshold, a formula put in place under the Administration Act designates a proportion to various parties.

While a portion may also go to administration costs.

“If you pass away, depending on your scenario, you might think everything would go to a partner and then to any children, but that doesn’t necessarily happen,” Vale said.

“There’s even scenarios where even if you’re married, a part of your estate will go to your parents.

“There are misconceptions about who gets what. What you think is logical, isn’t necessarily what will happen if there is no will.”

The fact of the matter is, Covid has shown us the importance of financial resilience. Employers now have the opportunity to help employees be better prepared for whatever lies ahead by including financial wellness in their employee benefit programs.

To learn more about how you can better equip employees now and into the future check out Footprint Connect

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