Financial education is often the first step in a financial wellbeing strategy – it’s important, but it is not sufficient to achieve genuine behaviour change and improved financial wellbeing.
Many organisations get caught up in working out how to convince people of the need for certain behaviours, when they should be focused on just making the behaviour easier.
Because improving financial health is no different from anything else – the easier you make it, the more likely someone is to do it.
Automating decisions is about as easy as it gets – the obvious example is pensions auto-enrolment. To not take part, you have to actively opt out.
Another is auto-escalation – where contributions rise in line with pay. Once this is agreed, it happens automatically – unless there’s a request to stop it.
Nudging people to act in the way you want through positive reinforcement or indirect suggestion can be another option. A traffic light system is a good way of doing this: no-one wants to see ‘red’ (especially if there’s a direct comparison with colleagues or similar people) and seeing this may nudge them to take an action.
Gamifying or incentivising good behaviour are other effective ways to encourage action.
Ultimately, it’s about reducing the cognitive load of behaviours that promote positive financial wellbeing – the easier you can make these behaviours, the more likely people are to do them.
This article explores one slice of our full, free report, ‘The truth about financial education at work‘. Download it below.