finance, business, mental health, anxiety, money, business Image: Pexels, relieving stress through financial empowerment
Millions of South Africans run out of money within five days of getting paid – and the financial stress of worrying about how to get through the rest of the month is affecting their productivity at work, their self-esteem and ultimately their mental health.
A research by a financial empowerment start-up Level Finance says that employees’ money woes have a major impact on employers, as lower income employees spend between two to three hours a day worrying about their finances.
Many turn to loan sharks and payday lenders to bridge the gap, but this only compounds the issue, as they end up paying up to half their salaries in fees and interest rates for loans that are typically used to pay for food, transport, and rent.
With October being Mental Health Awareness Month, Level Finance CEO Raeesa Gabriels says empowering South Africa’s employees to have control over their finances is one of the most positive things employers can do to ensure improved mental health in the country.
“We cannot underestimate the impact of financial wellness on mental wellness in the workplace. The pandemic has seen employers put a major focus on mental wellness in areas like burnout and exhaustion, but we tend to treat financial stress as a separate issue, rather than part of the problem. We’ve got to do more to help our people become financially healthy too,” says Gabriels.
The impacts of financial stress are significant. A recent PwC survey in the US found that personal financial issues impacted the mental health of 34% of employees in the past year, with a clear impact on three critical areas that affect a company’s culture and business success: retention, mental health and productivity.
For Gabriels, the starting point of financial empowerment for many employees is allowing them to access a portion of their wages before payday.
But, she stresses, wage access is not an advance, or a loan: it is giving the worker the ability to access money they have already earned, but is locked into the system by the 30-day wage cycle.
By allowing employees to match the timing of expenses to income, they can steer away from expensive credit, reduce indebtedness and ultimately start saving.
The difference between payday loans and earned wage access on an employee’s finances can be massive.
If an employee borrows R1000 from a payday lender or a loan shark six times a year, they can end up paying as much as an additional R3000 in interest and fees.
In this case, accessing their earned wages would see them pay only R210 in fees.
A survey by DebtSafe in June 2022 saw 80% of respondents saying they struggle to save, because they don’t have enough money to cover their living expenses, and many are mired in debt.
A third of respondents said a lack of finance knowledge is the main reason they struggle to budget – and this is where Gabriels wants to make a difference.
“By empowering their employees to take control of their finances, employers will have happier, more productive workforces, with less absenteeism and lower turnover.
If we can eradicate predatory lending in South Africa, we will go a long way towards having a more financially healthy population – and a more productive one,” says Gabriels.
Related Topics: