A holistic concept underlies the definition of financial well-being - and well-being in general - believes Gautam Chainani, President Human Resource - Strategic Initiatives at JSWand. Speaking at TechHR India earlier this month, he said that an active lifestyle which involves physical, emotional, psychological and financial stability; the quality of life, the quality of relationships and the quality of our health; all these add up to the definition of wellness.
So what is the shape of financial well-being, in this picture?
For Gautam, in the last decades, “The whole concept of financial wellness was all about retailers: how does one spend, how does one save, how does one manage and plan finances. Even if you look at the government of India today, the structure of financial wellness is around EPFO and ESIC (employee pensions) focus around the retailer mindset.
But, according to this global expert, there is one factor that is changing this characteristic in the definition of financial wellness. It is the multigenerational workforce, which conceives this wellness as a desirable objective now, "in the present rather than in the future".
It's all about education
More than three decades of experience in the field of People Management have made several things clear to Gautam. One of them: financial well-being is also related to education. Understood as the security and freedom of choice - only the consequence of correct and informed decisions - financial management can also be learned.
According to Gautam, 90% of current education in India and the U.S. focuses on retailers, but there is a gradual shift in the way people think about financial wellness in the current context. The goal is very specific: to help people manage their finances better.
There is another element to financial wellness, which Gautam identifies as "behavioral finance," a theme that is gaining traction. "Man is a rational animal and makes many important decisions based on misinformation. Or he makes decisions on his own, which are not the right ones".
An issue of interest to employers and employees
Financial well-being is a topic of interest to employers, especially in the last two years, when the pandemic, coupled with inflation and unemployment data in India has wreaked havoc on the macroeconomic level.
“I would just like to talk about six trends that are happening on a macroeconomic level”, said Gautam, in his TechHR talk. “First of all, the Consumer Price Index is hovering around 7.8 (and these are the official numbers). We know unofficially the inflation is much higher than that”.
He also pointed to the employment rates, both rural and urban. “They are hovering between eight to 10%. RBI has a target of inflation which was earlier 2 to 4% that they have shifted from two to 6%”, he said. “It is a very large range. For a central bank to take itself indicates that inflation is actually galloping away out of control. Also, we've just come out of the pandemic and that has actually impacted a lot of people's savings”.
All of these factors have directly affected the financial well-being of employees, but also of employers. Gautam cited an anecdote to illustrate this affliction. "I was at the plant the day before yesterday and I was talking to the HR manager there. He said: 'We had COVID with cases in the family and these that have literally wiped out half my savings of the last 20 years'." That -said Gautam- has been another factor where people “have to repack, go back and recoup their savings”.
He mentioned a last fact that is closely related to financial well being: organizations are moving away from fixed pay and moving into variable pay and LTIPS. “Variability is another area where there is not a steady stream of money coming in every month, but it's more at the end of the year or end of half year or end of the quarter, as the case may be”.
Finally, Gautam reminded us of the fact that the government is slowly and steadily increasing the retirement age. It used to be 58 and now it is moving to 60, and probably will move from 60 to 62, if the government statements become a reality. “This clearly indicates the need for people to work longer because there's not enough savings happening”.
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