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Research Study Indicates that Credit Counseling Improves Financial Wellness and Employer Profitability, September 7, 2000. Virginia Tech

BLACKSBURG, VA, SEPTEMBER 7, 2000 - New research findings demonstrate that credit counseling improves the financial wellness of workers as well as their employers' profitability. Clients of a non-profit credit counseling agency in the mid-Atlantic were surveyed immediately following counseling and again one year later. The purpose of the study was to assess the personal and work outcomes of a sample of employed individuals from 25 states who participated in credit counseling as clients of a non-profit credit counseling agency between 1999 and 2000 (N=163 and a return rate of 73%). As a result, Virginia Tech's National Institute for Personal Finance Employee Education (NIPFEE) determined that a number of positive financial behavior changes occurred that positively affected financial behaviors, health, and work outcomes.

One year following credit counseling, the workers surveyed (N=163; 73% return) had instituted a number of positive financial behaviors, such as reducing personal debts, cutting down on living expenses, and following a budget or spending plan. They also reported much lower frequencies of financial stressor events including:

• overdue creditor notice
• creditor telephone calls
• late charges incurred
• used cash advances to pay another bill
• not enough money for emergency, inability to pay insurance premium
• wages garnished

At the beginning of credit counseling, 88% were dissatisfied with their financial situation and this dropped to 59% one year later. Another 22% were satisfied with their financial situation one year later (this rose from 4%).

The workers reported decreased concerns about personal finances and lower levels of stress from money problems after one year. Their overall level of stress basically moved from "severe" or "overwhelming" at the beginning of counseling to "moderate" or "low" one year later. They also indicated significant improvements in their personal finances, levels of financial wellness, and feelings about current financial situation.

Of critical importance is that the job outcomes of the credit counseling clients improved over the year. The workers reported improved levels of productivity including better:

• quantity of work accomplished
• quality of performance
• performance rating from boss
• absenteeism
• presenteeism (total work days lost and days cut down on activities)
• less work time used for personal financial matters (down from 27 hours a month)

Also, the workers reported improved health status one year after commencing credit counseling. These job outcomes are a proxy for improved employer profitability.

This research is important because employees were pre-assessed, provided a treatment of financial education, and assessed again a year later with the result that both personal finances and job outcomes improved. These findings, says the lead researcher on this study, Dr. Dorothy Bagwell, "clearly suggest that credit counseling works! It improves employee financial wellness as well as employer profitability."

Virginia Tech's National Institute for Personal Finance Employee Education (NIPFEE) is a not-for-profit research institute. Since its inception in 1997, the vision of NIPFEE has been to inspire and motivate employers to provide comprehensive workplace financial education to employees, thereby raising the financial literacy and security of the American workforce. For more information please see the NIPFEE website at www.chre.vt.edu/pfee or call (540-231-6677) to reach Tom Garman, Professor (tgarman@vt.edu). The lead researcher on this study, Dr. Dorothy Bagwell (dbagwell@hs.ttu.edu), can be reached at Texas Tech University (806) 742-3050.