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VIEWPOINT: When finances keep us awake at night

A recent study by US research firm ComPsych reported that a staggering 92% of Americans are losing sleep over their finances – South Africans are not much different.

The human cost of over-indebtedness – homes repossessed; unemployment; record levels of unsecured debt and rising default levels; frozen credit and dwindling retirement savings – is severely impacting companies through declining productivity. Today, financial stress is seen as the biggest factor underlying general stress levels in the workplace.

Financial distress underlies most absenteeism; ‘presenteeism’ (being at work but unfocused); deteriorating customer service; garnishee order management; workplace accidents and increased error rates. Certainly, a spike in fraud incidents can usually be directly correlated to financial distress.

In the USA, 51% of employees claimed they were less productive at work as a result of stress, according to the American Psychological Association (2009). Job stress is estimated to cost US industry more than $US300 billion a year in absenteeism and lowered productivity.

In South Africa, according to the South African National Credit Regulator, a fifth of credit active consumers are at least three months behind on repayments. Of the 19.5 million credit active consumers, no less than 12 million have missed at least one repayment; while nine million (46.4%) consumers have an impaired credit record as a result of missing three or more instalments.

In the latest Adcorp survey, in 2011 alone the loss of output due to absenteeism totalled R3.9 billion, while cumulatively since 2000 the South African economy has lost R47.5 billion in real terms due to absenteeism.

Employers can play an important role in fighting financial illiteracy: few employees understand their retirement fund benefits, let alone the need for household budgeting and saving. Most lack the skills to balance their household obligations; medical expenses; children’s education; electricity and transport costs, each of which appear to be rising faster than their incomes.

Certainly, few households make any provision for an unforeseen or traumatic event, including retrenchment or illness. Is it any wonder the average citizen is lying awake at night worrying – and unproductive at work the next day?

Employers wanting a more productive and profitable workforce need to re-visit their financial wellness programmes. Where they do not have such programmes, they need to implement one.

First, they need to understand the issues their employees are facing, what level of financial literacy is necessary to equip them to budget and manage debt – and at a bare minimum to offer their employees retirement provision and cover for traumatic events.

A relatively inexpensive programme can work wonders for improved productivity.

Author: Mike Lledo CA(SA) is the CEO at Consolidated Financial Planning.