Changing employee attitudes and behaviour

Today or future focused?

Focus

Attitudes continually change through generations and this is clearly visible in recent years as we see a shift-change in employees' attitudes to work-life balance and savings. Half of our respondents said they 'live for today' when it comes to their finances - is this representative of your workforce? Providing a mechanism to seek feedback in the form of surveys or focus groups will help to develop an understanding of this. Can you engage your employees to think wider than today when it comes to their financial health?

Are employees living for today or future focused?

Our experiences shape our attitudes and behaviours. Over half of those we surveyed said they ‘live for today’ when it comes to their financial habits rather than thinking about saving for their future. We see a small increase in ‘live for today’ for the young and mid-career age groups however, there are still more than 2 in 5 aged 55 and over who feel the same way. We also see a small increase in those who aren’t able to manage day to day in the 25 to 44’s leaving little bandwidth to think about the future.

Question: What is your attitude to your financial habits and behaviour?

The Employers perspective

When we look at the employer perspective, they are in tune with employee behaviour with 3 in 5 thinking employees live for today rather than for tomorrow.

They are however, out of line with those they feel can’t cope let alone plan for their future. The key point here is to ensure the organisation are aware of areas where support is required. For example, communicating pension benefits to those who are struggling with their day to day will not be effective if they have no capacity to take action.

Question: Which of the following best describes how you think your employees manage their financial habits and behaviour?

They can't manage today let alone plan for the future

They live for today – they’ll save in the future / don’t foresee saving for the future

They live for tomorrow – If they save today they can spend in the future / they leave a little for today too

I don't know

Financial decisions – wider society and the planet

The impact everyday decisions have on society and the planet often comes into play when thinking about spending, physical health and transport choices for more than 1 in 3 of us.

However, 1 in 3 say it rarely or never comes into consideration when thinking about saving for the short, medium and long-term. Is that because of a lack of engagement with future savings versus the here and now, or is it out of sight, out of mind?

Question: How often are your life choices affected by the impact they have on wider society and the planet?

LCP viewpoint

Zoe Burdo, Senior Consultant, LCP

From a behavioural perspective, people tend to be most irrational about decisions that evoke strong emotions...

...The results of this survey support the theory - thinking about the future is emotional. It involves visualising our own ageing and potential health challenges, long-term commitments and the care and loss of family and friends. It also means thinking about climate change, political unrest and uncertainty about the future state of the world. Add worry about personal finances into the mix and for many people it is enough to tip us over the edge into complete denial. Even for those who have good information and resources available to them, it can mean we metaphorically stick our heads in the sand and hope that things get better around us.

It is therefore not surprising that the majority of people surveyed said they ‘live for today’. Thinking about the future can be unsettling. Financial planning is complicated. For many, they would rather not think about it.

However, even for those who do take that first step and think about what their financial needs will be in the future, it doesn’t always translate to a decision to save more now.

It is widely known that most people have a strong preference for having cash available to them now instead of locking into future investments and this ‘liquidity preference’ makes it very difficult to encourage long-term savings. This isn’t just instant gratification, but due to an overwhelming desire to avoid feeling regret. We don't want to miss out on experiences or happiness now, just for what we see as the chance of an improvement to our future happiness. It’s uncertain and risky. What if we give up a holiday now and then win the lottery in ten years? That missed opportunity was unnecessary. What if we penny pinch for decades just for our investments to perform badly or our lives to be completely disrupted due to terminal illness or global catastrophe? Then our efforts were futile, and we regret not living life to the fullest while we had the opportunity.

Unfortunately, we aren’t very good at weighing up these risks. The likelihood of a lottery pay out or catastrophe are miniscule compared to the very likely discomfort that will be felt for those who fail to save for the future.

So what can employers do? They can help employees visualise a positive future and give them a good understanding of the risks - particularly the risk of doing nothing or under saving. The more we feel in control, and not overwhelmed, by finances, the more empowered we feel to engage and consider things more objectively. Going a step further, using behavioural theory to encourage good behaviour, through techniques like nudges, can also be a powerful tool.