We all know the cliché ‘money doesn’t buy happiness’, but it’s surprising how often people forget this simple financial truth.
When we talk about financial wellbeing, there’s the assumption that it’s around helping employees earn more money. Yet having more money doesn’t necessarily tie into improved financial wellbeing. You only need to look at well-publicised cases of lottery winners filing for divorce or family fallouts to see the truth in this.
Financial wellbeing is for life, not just for retirement
What does lead to improved financial wellbeing however, is an all-round better understanding and awareness of money and finances throughout life. It’s understanding your own financial situation, improving your knowledge and making better financial decisions. It’s not being stressed about money, irrespective of earnings. It’s having the funds to save for a car or a holiday. It’s not being reliant on loans or getting into debt. And ultimately, it’s having enough to live on in retirement.
At Aon, we define financial wellbeing as ‘the ability to confidently manage financial life today, while preparing for the future and anything unexpected along the way’.
Financial wellbeing is being able to afford to do what you want to do, in order to accumulate experiences rather than merely wealth.
To this end, we’ve seen a massive increase in employers realising the importance of financial wellbeing over the past two to five years, and the Covid-19 pandemic has brought about an even more significant rise in businesses looking at financial wellbeing initiatives.
The role technology therefore has in supporting financial wellbeing is key. Fintech can help to improve financial understanding and knowledge with user-friendly apps and can support users in making improved financial decisions which can ultimately improve outcomes.
The rise of mobile apps
The term ‘fintech’, encompasses most financial tech products on the market across a range of industries, including banking, asset and wealth management systems, financial aggregators, debt management providers, salary advancement tech and money management systems.
What all these products have in common is that they are all aimed at helping people manage their money better.
Like any product or service, fintech has had to respond to changing consumer behaviour, so following an unprecedented rise in app and mobile usage in recent years, fintech mirrors how people are using or running their lives and the majority of fintech products are now mobile-enabled.
In fact, global insight and analysis experts, Caci consultancy predicted last year that by 2021, more people will be using mobile banking apps than visiting high street banks.
Open banking and mobile banking apps, are a massively growing area and plays a big part in improving financial wellbeing. As an example – some of the banks now have functions in place which allows customers to double and triple check they’re not being scammed when they make certain transactions, while the role of app-based financial aggregators allow customers to see their entire financial picture in one place.
Aon’s Well One Money solution too, enables people to understand their complete financial world including assets and expenditure. It’s this knowledge piece which can help people to make improved financial decisions.
At its most beneficial, fintech provides a robust risk mitigation framework and gives people a better chance to understand what they are spending their money on and where it’s going, which may lead to improved decision making and outcomes.
Fintech can show users what their finances are and help them make better decisions through financial education podcasts and online modeller calculators.
The right thing to do
It also levels the playing field. Not so long ago, those who could afford it went to a financial adviser for advice, but the cost locked a lot of people out. Now financial advisors have moved towards wealth management and the rise in financial aggregators and financial advice and education services has enabled more people taking control of their own finances.
Earlier this year, the government’s Money & Pensions Service published The UK Strategy for Financial Wellbeing 2020-2030 which sets out a clear strategy for the next ten years. Their key areas of focus are around improving access to financial education, advice and guidance, encouraging a nation of savers and helping people plan for later life. Their overarching belief is that a financially healthy nation is good for individuals, communities, business and the economy.
Employers then, have an important role to play in providing access to financial wellbeing technology in the workplace, not least because of the well documented link between financial wellbeing and mental health.
Indeed, the Money and Mental Health Policy Institute says those with mental health problems are three and a half times more likely to be in problem debt.
For employers, providing access to financial wellbeing technology should be a top priority. And for employees who may well be struggling with mental health issues or fluctuating stress levels, having the means to improve their financial wellbeing through today’s innovations can make all the difference.
Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.