There is increasing evidence that poor financial literacy can have a negative effect on a person’s state of mind, leaving them feeling powerless and unable to deal with sources of financial stress. This adds to the growing impact of other mental health distractors such as depression, burnout and mental exhaustion. The result is disengaged, less productive employees.
This is according to Elna Van Wyk, Head of Group Disability and Underwriting at Momentum Corporate, who says that while Mental Health Awareness Month may have come to an end, it’s important for conversations on this topic to continue.
According to Van Wyk, research conducted by Momentum Corporate shows that mental exhaustion and stress are the main contributors to issues associated with mental health. Furthermore, nearly 30% of employees surveyed said their financial situation distracted them from their work. The most common sources of stress were debt, insufficient savings, unplanned expenses and day-to-day affordability.
Van Wyk says, “Mental problems are not only brought on by biological and psychological factors, but also social and environmental factors. For example, the current economic climate adds to financial stress.” This is evident in the results of the latest Momentum/Unisa Consumer Financial Vulnerability Index (CFVI) which shows that South Africans severe financial vulnerability continues to deteriorate.
Momentum Corporate’s data shows that the proportion of psychiatric claims increased to almost 10% of all disability claims in 2018. These statistics also show that psychiatric claimants were in general younger than non-psychiatric claimants and their salaries are on average 30% higher. Furthermore, 45% of psychiatric claims incurred since 2012 are still being paid, compared to 37% of non-psychiatric claims.
Van Wyk adds, “The profile of psychiatric claimants being younger, earning higher salaries, and more difficult to rehabilitate suggests employers are missing out on the contribution of younger, potentially better-skilled employees for an extended period.”
“A big part of mental illness and stress is the feeling of being powerless. Empowering employees with better financial literacy and planning skills will enable them to take control of their finances and improve their financial and mental wellbeing,” says Van Wyk.
“There is a great need for workplace programmes that focus on education sessions that empower employees to understand and manage finances better, as well as personalised individual engagements.”
Van Wyk also believes that the new retirement regulations, which include a requirement for retirement funds to offer benefit counselling, is a step in the right direction. A benefit counsellor can assist employees who are retirement fund members to get on top of their financial situations, and understand and appreciate the employee benefits available to them. This will result in more informed decision-making and better financial outcomes over the long term.
Van Wyk also points out that a multi-channel benefit counselling approach improves employee engagement and reduces employee apathy. “We want members to have the right information, at the right time to make the right decision for their personal journey to financial success,” says Van Wyk.
“Once members are better-informed through workplace programmes and benefit counselling, they should speak to a financial adviser for professional, personalised advice tailored around their specific situation and needs.”
“Employees’ realities and state of mind changes when they engage in their own financial planning and gain control of their financial future.”
Van Wyk concludes, “Employers who empower employees to get on top of their financial situations will see an improvement in employees’ mental health and workplace productivity. This should also lead to a decline in psychiatric claims over time, contributing to sustainable pricing for group insurance.”