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Can Utilizing Behavioral Change Theory Boost Financial Wellness?

Even though individuals know what they should do about money, decisions can be deeply emotional and many times they have trouble overcoming resistance to act on those decisions. But a new white paper suggests that the latest psychological insights combined with technology can help inspire employees to take action to improve their overall financial wellness.

In “Wellness is Wellness,” authors Carla Dearing, CEO of Sum180, and Holly Verdeyen, senior director of Defined Contribution Strategy at Russell Investments, describe how certain management tactics, communication strategies for different generations and personalized “gamification” techniques can help knock down some of the barriers that are preventing people from taking that first step.

Dearing and Verdeyen explain that most financial wellness programs are built on the assumption that if employees are taught financial literacy, their personal financial situations will improve. But that may not necessarily be the case. They note that advice tends to be generic and one-size-fits-all, rather than personalized and action-oriented. As a result, many financial wellness programs often see low engagement and low participation rates because the program was not personalized and was not designed to effect behavioral change.

“Employers are understandably surprised when employees reach a high level of financial literacy and still fail to act on that knowledge,” explains Verdeyen, who adds that, “Deep emotions around money foster paralysis, even for employees who know what they should do next.”

Beyond Education

Emphasizing that “education alone is not the answer,” the authors point to several behavioral change principles that a financial wellness program should draw from to make a meaningful difference in employees’ lives.


  • Social cognitive theory: Here, the authors explain that social interaction can help improve an individual’s ability and inclination to make change. For example, they note that the motivational effect of sharing fitness-tracker results with coworkers has worked in many workplace fitness programs and may be transferable to a safe financial setting, where employees can share stories and realize they are not alone in their challenges.

  • Positive psychology: In this context, the authors note that positive reinforcement that highlights accomplishments and offers words of encouragement, rather than judgmental messaging from their employer, should be emphasized. Extrinsic rewards, such as points, badges or levels, can also help employees start on the right path, they note.

  • Stages of change: Dearing and Verdeyen further suggest that small, personalized steps enable individuals to move from the earlier stages of change toward action. “By giving employees only their few most important next steps at a time, in manageable bites that can be accomplished in a period of months, we empower them to focus and act.”

  • Gamification: In this respect, the authors suggest that framing a situation as a game or as a role play leverages an individual’s desires for fun, mastery and achievement to effect behavioral change.


Generational Differences

When it comes to addressing different generations, Dearing and Verdeyen further emphasize that individuals’ financial situations don’t always correspond to their generation. As a result, while there is value in targeting different generations with advice on issues believed to be the most relevant, the authors suggest there is greater value in recommendations personalized to the individual’s circumstances and not merely to their generation. For example, they note that the financial picture of a recently divorced 50-year-old parent of three young children may not necessarily be in line with other people of the same age.

The report further emphasizes that non-traditional, digital approaches must be employed to engage Millennials, who are “squarely on the other side of the digital divide.” While employers “are targeting retirement preparedness and the financial industry is publishing reams of information about retirement preparation, these sources aren’t providing Millennials with access to advice that applies to them personally,” Dearing and Verdeyen contend.

Also important is addressing organizational alignment and the “silo” issue by integrating health and wealth in order to maximize the effectiveness of the wellness initiative. “Health and wellness, regardless of physical or financial, is all about engagement, so while it may be logical to silo the administration of medical and retirement benefits organizationally, participants aren’t benefitting from the distinction,” the authors state.

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