Credit counseling increases productivy, lowers financial stress, study finds

December 06, 2000

Blacksburg, Va. - Dec. 7, 2000 - Clients of credit counseling demonstrated improved levels of personal financial and work outcomes a year after participating in counseling, according to researchers at two universities.

Clients of a non-profit credit-counseling agency were surveyed immediately following counseling and again one year later. Analyzing data collected at two points in time allowed for a comparison of a sample of employed individuals from 25 states between 1999 and 2000. The research was done by Dorothy C. Bagwell, assistant professor with the Center for Financial Responsibility at Texas Tech University and E. Thomas Garman, professor at Virginia Tech and executive director of Virginia Tech's National Institute for Personal Finance Employee Education.

One year following credit counseling, the 163 employees surveyed had started 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 notices
• creditor telephone calls
• late charges incurred
• using cash advances to pay another bill
• inability to pay insurance premium

At the beginning of credit counseling, 88 percent were dissatisfied with their financial situation, which dropped to 59 percent one year later. Another 22 percent were satisfied with their financial situation one year later -- up from 4 percent.

The employees reported decreased concerns about personal finances and lower levels of stress from money problems after one year. Their overall level of financial stress basically moved from "severe" or "overwhelming" at the beginning of counseling to "moderate" or "low" one year later. They also indicated higher levels of financial wellness, and satisfaction about their current financial situation. Also, the employees reported better health status one year after commencing credit counseling.

Of critical importance is that counseled employees reported improved levels of job productivity in:
• quantity of work accomplished
• quality of performance
• performance rating from boss

The employees also reported lower:
• absenteeism
• presenteeism (when employees are on the job but not able to fully perform)
• instances of work time used for personal financial matters (down from 27 to 13 hours a month)
The above job outcomes are a proxy for improved employer profitability.

Between the preassessment and one-year post-counseling study, this research suggests three positive results. First, employees reported decreased concerns about personal finances and lower levels of stress from money problems. Second, they recorded improved personal financial wellness. Third, the employees communicated that they had increases in work productivity and job outcomes that can contribute to higher employer profitability.

"This study demonstrates that credit counseling works," says Garman. "Outcomes of credit counseling are improvements in personal financial wellness and better job productivity."

"These findings should motivate employers to help their employees who are experiencing financial difficulties," says Bagwell, assistant professor at Texas Tech University and the lead researcer. "If employees are worried about their finances, this stress may make it difficult for them to focus on their work and thus result in a loss of productivity. The impact on organizations for employees with financial problems may be seen in reduced output, lower sales, and poor service."

Two solutions to help employees with financial problems are offering referrals for credit counseling and offering comprehensive workplace financial education. These programs can teach employees to prevent and solve their financial problems and challenges.
PR CONTACT: Jean Elliott 540 231-5915

Virginia Tech

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