The way in which our brains process information is subject to bias. This is very much the case with respect to financial decision making. 

In my experience as a financial adviser and money coach, one commonality with regards to how people behave with their money is that – no two people behave exactly the same way! 

There are many reasons for this, but cognitive bias goes to explain a large part of it.  

What is a financial bias?

A financial bias refers to a systematic error or deviation from rational decision making in financial decision making. These biases are cognitive and emotional tendencies that lead us to make decisions that are not in our best financial interest. 

Financial biases can be rooted in personal experiences, beliefs, social norms, or psychological factors, and they can manifest in different ways. 

How do they affect our financial wellbeing? 

These biases can cause us to miss out on opportunities, take on too much risk, or make impulsive decisions that are not in our long-term financial interest. They can lead to us spending more than we should or saving less than we need. 

Being aware of these biases is the first step in managing our finances more effectively.

What are some examples? 

Here are 5 common biases that influence decision making around money. 

1. Loss Aversion Bias

Loss aversion bias is the tendency for people to avoid losses rather than seeking gains. This means that we feel the pain of losing money more acutely than we feel the pleasure of gaining it. Loss aversion bias can make it difficult for us to take risks, such as investing in the stock market.

Loss aversion bias can manifest in a variety of ways. For example, it can cause people to hold on to losing stocks for too long, in the hope that they will eventually recover. This can result in significant losses over time. It can also cause people to avoid investing altogether, missing out on potential gains in the stock market.

To overcome loss aversion bias, it is essential to focus on the potential gains instead of the potential losses. It’s important to consider the long-term benefits of investing in stocks, and to remind ourselves that market fluctuations are normal. One strategy is to set up automatic contributions to a retirement account, so you don’t have to think about it. This can help you focus on the long-term benefits of saving for retirement rather than the short-term pain of losing money.

2. Confirmation Bias

Confirmation bias is the tendency to seek out information that confirms our pre-existing beliefs. This can lead to bad financial decisions because people may only seek out information that confirms what they already believe, rather than seeking out a range of opinions.

Confirmation bias can be particularly problematic when it comes to investing. People may only seek out information that confirms their belief in a particular stock or investment strategy, rather than considering a range of viewpoints. This can result in missed opportunities or significant losses over time.

To overcome confirmation bias, it’s essential to seek out multiple sources of information before making a financial decision. We need to challenge our assumptions and seek out alternative viewpoints. This can be particularly important when it comes to investing, where there is often a range of opinions on the best strategy to follow.

3. Anchoring Bias

Anchoring bias is the tendency to rely too heavily on the first piece of information we receive when making decisions. This can be particularly problematic when it comes to pricing. For example, if we see a sale sign that says “50% off,” we may feel like we are getting a good deal even if the original price was overpriced.

Anchoring bias can also lead people to hold on to investments that are no longer performing well, in the hope that they will eventually recover. This can result in significant losses over time.

To overcome anchoring bias, it’s important to do your research before making a purchase. Look up the prices of similar items and compare them to the sale price. This will help you determine whether you are actually getting a good deal. It’s also essential to avoid impulse buying and take the time to consider your options.

4. The Halo Effect

The halo effect is the tendency to attribute positive qualities to a person or product based on a single positive trait. For example, we may assume that a car is high-quality because it has a luxury brand logo, even if the car itself is not actually well-made.

The halo effect can also lead people to invest in a particular stock or investment based on a single positive news article, without considering other aspects of the investment.

To overcome the halo effect, it’s essential to do your research and not make decisions based on one positive trait alone. We need to look at multiple aspects of a product or investment before making a decision. It’s also important to consider the potential downsides or risks of a particular investment before investing in it.

5. Present Bias

Present bias is the tendency to prioritize short-term pleasure over long-term benefits. This can lead to overspending and not saving enough for the future.

Present bias can manifest in a variety of ways. For example, people may choose to spend money on a vacation rather than saving for retirement. They may also prioritize buying material possessions over saving for a down payment on a house.

To overcome present bias, it’s essential to focus on the long-term benefits of saving for the future. We need to create a budget that allows us to save for both short-term and long-term goals. We can also try to find ways to make saving more enjoyable, such as setting up automatic contributions to a savings account or rewarding ourselves when we reach a savings goal.

Managing Bias

Our behavior with money is heavily influenced by cognitive biases. We can’t get rid of bias, but we can adjust for it when it comes to the decisions we make around money.  

The level and degree to which our bias needs to be managed is an individual thing, and may depend on the size and importance of the decision being made. 

For example, if you are considering the degree to which anchoring bias impact may be impacting your decision to buy a new toaster on sale vs the pleasure bias of an expensive luxury overseas holiday – you may be inclined not to get too hung up on the former! 

Ultimately, being aware of these biases and taking steps to overcome them is essential for managing our finances effectively. 

Some other successful strategies for managing bias may include: 

• Focusing on the potential gains rather than the potential losses, 
• Seeking out multiple sources of information when making a big purchase 
• Avoiding impulse buying, instead taking your time to come to a decision 
• Doing your research, and exploring options 

We can improve our financial situation and reach our personal financial goals simply by being aware of how bias affects our decision making at the time of making a decision so that we can make adjustments where necessary. 

Diversity and Inclusion policies (D&I) in the workplace set out an organization’s commitment to ensuring an equitable, diverse and inclusive workplace. 

A diverse workplace is an important asset to an organization. 

Valuing the differences of others is what ultimately brings us all together and can help build a successful, thriving workplace and a fair and inclusive work culture. 

This is a wonderful corporate aspiration and one worthy of dedicated workplace policy to support it. 

However, we must ensure that diversity and inclusion is supported with the right resources. 

By broadening the talent pool through diversity and inclusion we attract talent into the organization. Talent that comes from all walks of life. 

Diversity in talent brings a diversity of life experiences marked by differences in socio economic background, financial resources & capabilities, social capital & financial support networks, and financial mindsets. 

All these factors have varying degrees of influence over an individual’s financial wellbeing. 

The ANZ Financial Wellbeing Survey (2021) reports that socio-economic factors accounted for 54.5% of the explained variation in overall financial wellbeing between respondents, evidencing the clear link between social and economic factors as they relate to an individual’s upbringing and background and their financial wellbeing in adulthood. 

This idea is further supported by the Findex Young Money Research Report (2021) which found that in general terms:

• Young people who have migrated to Australia or first generation Australians;
• Young people who had a long-term health condition or disability while growing up;
• Young people who had a parent who was unemployed for 12 months or more while growing up; and
• Young people who lived in a single parent home while growing up

were LESS likely to choose answers in response to financial scenarios that suggested higher levels of financial literacy and capability.

So when adopting a policy that results in a broadening of the talent pool at an organizational level, the business needs to ensure there are sufficient resources to ensure these diverse financial wellbeing needs are adequately supported.  

Failing to do so only serves to weaken the organization’s mission to drive inclusivity and equity amongst employees. 

Not only are these skills necessary to create better personal financial outcomes and successes in life, but financially stressed employees are 2.2 times more likely to leave their employer than those who are not and 76% agree they would be more attracted to another company who cared more about their wellbeing. [PWC Employee Financial Wellness Survey 2022].

Remuneration is only half the battle. 

If your employees are not supported with the right skill set to manage and trade that income for their own financial security and prosperity in life – then you have missed an opportunity to genuinely support greater equity and opportunity for your employees. 

Improving sales performance amongst staff has traditionally been the domain of training organisations that focus on improving job skills.

Time management and sales training are undoubtedly fundamental to success as a salesperson and hence, refining and bolstering your staff’s skills in these areas is a prerequisite for hitting sales targets and driving business revenue.

But are they enough to drive an individual to outperform – to exceed their KPIs and sales targets?

Employee Motivation

Developing in your staff the skills necessary to do their job is really just one piece of the puzzle.

You might argue that remuneration is the incentive or motivation provided to drive outperformance, especially in the case where earnings and commissions are uncapped.

However, as every sales director knows, history has shown many times over that this isn’t necessarily enough to ignite your employees motivation to deploy their skill set to its fullest potential.

So what is the missing link?

How can you re-engage & reinvigorate your sales staff if more money and more skills are not the answer?

The answer lies in creating a tangible connection between the contribution they make to your organisation and the achievement of their own financial goals.

Helping them create a plan for turning the income they earn through your organisation into the things they want out of life.

Once they are able to see the plan behind how achieving their sales targets & KPI’s translates to a time and date for achieving their own personal financial goals – the motivation is ignited.

Why is this the case?

Well we all work to derive an income to pay for the things we want in life.

A house, a nice car, holidays with the family, providing for our kids’ education and being able to afford the kind of lifestyle we want to live.

The trouble is, most people are not taught how to manage their money properly.

Furthermore, they lack the time, inclination and skill set to really improve their personal financial health on their own.

Financial management isn’t taught at school and for the majority of us, is rarely discussed around the dinner table.

But developing this skill set is so important to the successful management and growth of an individual’s personal income.

Without a plan for managing personal cash flow and achieving their short to medium term financial goals, no amount of income ever seems enough.

There is a perpetual need for MORE money, to fill the leaky household budget.

This of course leads to financial stress and disengagement at work which can create issues with staff retention. All management problems that can be solved with the right wellness program.

Financial wellness programs are the missing link in creating an engaged, performance driven sales team.

A good financial wellness program will assist your staff to not only learn the basics of financial management through further education, but actively help them craft an individual approach to turning their remuneration into what they are really striving to achieve personally.

What is amazing to me, having been in the financial services industry for over 14 years, are the assumptions leadership has over who has a financial wellness need, and whose responsibility it is to help when talking about the issue of employee financial health.

High income earners and technical staff don’t need help

To the first point, who has a financial wellness need.

There is a perception that high income earners don’t have money problems. We all know that to be untrue and we don’t need research to prove it – but the statistics are there to prove the point if you like numbers.

Gallagher’s Financial Confidence Survey (2020) revealed that 20% of employees with a household income above $150,000 and 21% of managers and directors are spending up to 2 hours or more per week on personal finance concerns at work as well.

Sometimes the assumption is based on the service industry.

For example, I often hear Accounting service firms say their employees are ‘across numbers’ and aren’t in need of financial wellness services. Or that IT service firms & their staff are ‘techy’ and ‘analytical’ and therefore are ‘across’ their personal finances too.

These assumptions are dangerously simplistic and imply that reaching your financial goals, staying out of debt, navigating life’s big moments like purchasing a home, getting married and having a baby all rest on your ability to crunch some numbers.

When we know that mastering personal financial management has very little to do with math and analytics and much more to do with behavioural economics and soft money management skills.

It’s not my place to get involved

To the second point, some employers don’t want to get involved, maybe they don’t feel it’s their place, they don’t know how, or they simply don’t want to – it’s murky talking to staff about their personal finances (or lack thereof).

This perception needs to be challenged and re framed where it exists. Here’s why.

Let me ask you this; do you feel the same way about providing mental health assistance to employees who might be silently struggling and in need of support?

Or about providing nutritional seminars, gym membership discounts or fresh fruit bowls to encourage movement and healthy eating habits amongst staff?

Or even targeted professional development training courses where you recognise a need or lacking in skill to help that employee grow, develop and excel in their role?

I’m going to assume you answered no on all accounts.  

So why then is there a different attitude when it comes to an employee’s financial health needs?

After all, mindfulness is a skill to be learned.

Creating healthy habits is a skill to be learned.

And our job requires a set of skills to be learned.

Personal financial management…. you guessed it – also a set of skills to be learned.

Yet recognising those other needs in our staff and matching those needs with benefits doesn’t seem to have the same stigma that (some) leaders still have for providing financial help.

One important distinction must be made here; your employees don’t want YOUR personal help; they want professional help.

No one wants their boss or their manager to sit them down in the break room and ask them how their budgeting is going. Or their credit card debt. No one expects or wants that to be the solution.

Employees are looking to you to source that help; not be that help.

They have a trusted relationship with you as their employer and are turning to you for access to trusted resources through your network to help them find the help they need and better yet, know that it is there when they need it – even if that time is not right now.  

Whether providing financial wellness services to employees is an employer’s responsibility is ultimately a matter of opinion, but it certainly is an outstanding opportunity to add enormous value to the employer / employee relationship when done right.

So how do you identify wellness needs?

Here are my top 3 tips for stepping out of assumption-based decision making around wellness needs in your business and into strategic decision making.

Make use of available research

There is a lot of qualify research available in the financial wellness space. Some of it is US based research however we have some great Australian based research papers available nowadays too.

Use the research to discover key trends and build a barometer for the issues (and their severity) that you may be facing at an employee level within your business.

For example – in Gallaghers Financial Confidence Survey (2020), 7 out of 10 employees admit to spending between 2 and 4 hours a week dealing with their personal finances and up to 2.4 more days sick leave per year.

That can translate to a significant loss in productivity when extrapolated out against your entire workforce leading to business efficiencies  and ultimately a hit to your bottom line.

You need to work out what statistics are relevant to your organisation and what the possible or probably impact is on your business to identify wellness needs in your workforce.

Survey your staff

Once you’ve uncovered some of the metrics used to identify wellness issues from the research, depending on the size of your organisation you may want to survey your staff.

The effectiveness of this step will depend a lot upon the engagement of your employees – quality data in produces quality data out. So, engagement with the survey is key to utilising this step as part of wellness strategy creation.

Sometimes utilising professional services or assistance here can be the best way to ensure you’re asking the right questions and are therefore setting out down the right path.

Read the room

Workplace culture is also very indicative sometimes of the underlying wellness culture at the organisation.

If you are struggling with employee productivity and engagement, then there’ every chance the wellness strategies are ineffective and not producing the motivation required to drive output.

Where there are retention issues, the question must be asked as to whether the organisations wellness culture (or lack thereof) is to blame.

And your employees are also highly attuned now to what is basically window dressing in the benefits space versus what is truly valuable and beneficial to them.

They are really evaluating what they want out of life and looking at the role their work plays in helping them achieve that.

Looking within at the initiatives employed by the business in this space is a great way to move away from assumption-based needs assessment and to a more strategic decision based on data and insight.

Misconceptions about the place or need for financial wellbeing in the workplace can be detrimental to the businesses wellbeing goals. 

Most of the prevailing myths around financial wellbeing can be traced back to a misunderstanding of what financial wellness actually is. 

So let’s start there. 

When you are financially well, there is a balance between your satisfaction levels and financial status. The subjective and the objective come together in a way that makes the individual feel happy about their finances. 

At this stage, the individual has not only established a strong financial foundation but they also experience limited money related stresses.  

Now let’s take a look at some of the most common myths and how they are at odds with the definition itself. 

1. “We pay our staff well, they don’t have to worry about money.”

This one can be easily dispelled by pointing out that financial wellbeing is not equal to financial wealth. 

Instead, financial wellbeing is a complicated subject with wellbeing a result of many objective and subjective measures – that includes how people think and feel about money and how confident they are with managing it – irrespective of their monthly salary credit.  

In fact, research on financial wellbeing continues to dispel the myth that those on higher incomes have less financial worries. 

Gallagher’s Financial Confidence Survey (2020) revealed that 20% of employees with a household income above $150,000 and 21% of managers and directors are spending up to 2 hours or more per week on personal finance concerns at work as well.

ANZ’s 2021 Financial Wellbeing Survey found that socio-economic conditions have the largest influence on financial wellbeing, followed by financial behaviors and financial traits. 

That explains why 70% of lottery winners go broke or end up claiming bankruptcy. Earning potential means nothing if your employees don’t have the capability of confidence to turn their income into wealth. 

In the case of graduates and early career employees this is even more relevant as there is no formal education process around money management or guidance on the habits and behaviors necessary to support wealth creation. 

So as they enter the workforce and experience managing a full time income for the first time it is easy to see why financial anxiety and stress is so high for this cohort. 

One could even argue that the higher starting salaries available to early career employees today create an additional unexpected pressure to ‘make the most of’ and ‘do well’ with their big salary. 

This can create anxiety around younger employees who don’t have the skills set to manage this income and plan for their future, creating feelings of inadequacy and stress. 

Myth 2 – ‘Gen Z & Gen Y already have so many free resources to utilize, they don’t need our help.’ 

Yes we have the internet full of free information. There are books like the Barefoot Investor and a myriad of money management apps that tell you where you spend your money and when your bills are due. 

But young people ultimately want personalized help from people, especially when it comes to money and financial matters. 

65% of Gen Z say they ’re looking for jobs to include financial wellness training as an added benefit.  – Reference TIAA 2022 Financial Wellness Survey

In a recent Censuswide survey of Gen Z professionals (2022), 88% said that it was important that benefits were tailored to them as an individual, yet more than a quarter (28%) said that everyone in their current workplace receives the same benefits. 

And research by Gallagher shows that a staggering 1/3 of Gen Y & Z employees rate unbiased 1:1 financial coaching as something they are either highly or extremely interested in. 

Myth 3: ‘It’s not the place of the employer to help with their employees

personal finances.’

Your younger employees disagree with you. Gen Z & Y want more support from their employer. 

65% of Gen Z and 61% of Millennials believe their employers have a responsibility to help improve and maintain their financial wellness –  Reference TIAA Financial Wellness Survey 2022

Let’s examine this mindset for a second. Practically speaking, the average working Australian has a single source of income – their salary. 

This salary pays their bills, keeps a roof over their head, provides for all the nice things they want in life. Who pays this salary? You. 

You also provide the predominant source of their retirement fund too – via the superannuation guarantee system. 

So in actuality, you are connected to (nearly) every aspect of their personal financial world. So the relevance is obvious. 

But another influencing mindset factor here is culture. One where discussing finances and money is taboo. The problem is, this creates and perpetuates a stigma around money, especially when it comes to talking about any issues you might be having or that there are things you don’t know.  

But only a few short years ago this was the predominant view around mental health and wellbeing issues in the workplace too – and we now understand the enormous value of supporting our staff’s mental health in the workplace.  

We offer mental health and wellbeing workshops, courses and programs, meditation apps and sessions, yoga and relaxation rooms in the office – are we ‘getting involved’ in our employees mental health with these initiatives? No! 

By offering financial wellbeing solutions to staff you are not ‘getting involved’ personally, unless you plan to personally deliver the coaching, training and advice to your team in the lunchroom.

By partnering with a qualified services provider with expertise in this area you are outsourcing this sensitive subject, offering your employees professional expertise with complete confidentiality. 

Re-framing the mindset of management and key stakeholders that hold this view is an important part of positioning financial wellbeing benefits to staff in a way that destigmatizes the benefits and fosters genuine & sustained engagement. 

And finally, whilst improving financial wellbeing may never be the responsibility of employers, there is an enormous opportunity that awaits for forward thinking organizations who position themselves as employers of choice by destigmatizing financial wellbeing, promoting the integration of benefits into the employee experience. 

These are the businesses that will benefit from the uplift that improvements in financial wellbeing have on the employee and the business at large. 

Money worries are keeping your employees up at night and affecting their work. 

Statistically speaking 70% of all employees are worrying about or dealing with personal finances at work. 

• 64% are worried about unexpected expenses 
• 62% are worried about inadequate savings 
• 57% are worried about rising living expenses 

But you really wouldn’t know. 

Financial stress is a relatively silent problem. If you look around the office floor, it would be difficult to pick who may be needing or wanting some extra support, some additional resources or someone to talk to about their money. 

And herein lies the problem. 

How do you address something when you aren’t sure it exists and to what extent? 

The easiest way to think about this is to accept that if your business employs people, then you have some level of financial stress amongst your employees. 

Our finances are integrated with every aspect of our lives. From the day to day of paying our bills, to affording the experiences and things we want and want to do in life, to providing for our security in the future. For many people, having enough money means having a choice. Not having enough money means not having a choice. This distinction can impact individuals’ happiness greatly. 

It’s no wonder money is a leading cause of stress for everyone.  

So what can an employer do to help? 

Here are some ways to improve communication and encourage employees to talk about financial wellbeing at work. 

1. Position it right 

Ever heard the saying start with the end in mind? Too often, employers get the introduction all wrong. 

They start with the how, instead of the why. 

They jump straight into a workshop around understanding your superannuation contributions – talking about the how. 

You’re not here to ‘save’ your employees, you’re here to give them a platform to thrive! 

The introduction is your chance to demonstrate leadership, flex your corporate wellbeing muscles and genuinely show up for your employees with benefits that are here to support them on their life journey not save them from themselves! This mindset shift is greatly needed as it will drive participation, engagement and business results you are looking for. 

It’s time to rethink your wellbeing strategy, from a box ticking exercise disguised as a few webinars each year to an integrated solution that gives them the flexibility to learn, grow and thrive through all of life’s ages and stages. 

2. Show them you’re serious 

Genuine improvements in financial wellbeing cannot be obtained with a tick box exercise; it’s not something you can discuss once, pay lip service to or ignore. 

Not only will it not work, employees are astute and can tell when the organization is making a genuine effort or not. 

If your organization is serious about opening up a discussion regarding financial wellness, you need to start by showing your employees you take financial wellbeing seriously. This will require taking a different approach than most of your competitors and standing out from the crowd with a comprehensive solution. 

By showing a duty of care, your employees will feel valued and make the very most of the benefits package available to them. Higher engagement and participation will drive organic conversation about financial well being which is key to driving a more ‘financially well’ culture. 

3. Provide Options 

Not all employees feel comfortable engaging with discussions around their finances in the same way. Some are naturally social and prefer to learn through group experiences, meaning workshops are the perfect way to engage. 

Others are quiet and private and like to interact independently with support and so confidential coaching sessions and self paced learning are the preferred tools. Ensuring there is something for everyone promotes participation and a collective engagement with financial wellbeing – meaning you have a modality to direct your employees towards – whatever their preference. 

4. Create a language 

Just like we have with mental health we have expanded the language around mental health to include a wide range of experiences that fall under the one banner. Stress, anxiety, unhappiness, are more common experiences than say depression as one of the most severe forms of mental illness. 

We need to do the same for financial wellbeing. We need to create a language that identifies not just those in severe distress as in need of financial wellbeing support. 

By widening the scope to include those who would like better planning, organization and direction with regards to their finances – we reduce stigma and normalize the concept, making it something just about everyone can and should be able to benefit from. 

For example, at MoneyHappy we take the view that money is a tool and it can be used to help you afford the things that make you happy in life. That is a language and message that is applicable to just about everyone! 

5. Embed solutions in the employee experience 

If you’re providing a comprehensive program to your employees then you should have the ability to embed your suite of solutions into every aspect of your employee engagement experience. 

For example, you have a staff member going on maternity leave – what conversations and resources do you have around this period of leave? At MoneyHappy we employees can utilize the 1:1 personal coaching service available to all employees to address any financial concerns or anxieties around this life changing period characterized by lower income, higher expenses and decisions around return to work timeframes.

Or maybe you have a new graduate starting? This is a challenging and exciting time for an early career employee with many decisions linked to personal finances. What resources can you provide to them that fit under the banner of financial wellbeing? At MoneyHappy we can create these bespoke employee resources and content journeys relevant to your organization and benefits. 

 Including this information in communication with employees creates an embedded financial wellbeing experience throughout the business.