With inflation dominating the news for most of this year, even the most financially secure households have had to take a closer look at their expenditures due to the bleak and prevalent headlines.
As gasoline, used cars, hotels, rent, food, and electricity prices continued to soar, many consumers combatted increased costs by changing their habits.
And for some, even that isn’t enough.
U.S. consumer debt has reached $15.6 trillion according to the Federal Reserve. And it’s not just for home loans. Americans pay an average of one-third of their monthly income on debt other than mortgages, led by credit card debt.
Medical debt is also a big cause of financial (and health) distress. Most experience debt because of a rare life event, like an extended hospital stay due to an accident. Medical debt now impacts more than 100 million people in America.
Finances are the number one cause of stress for employees; more so than work, health, and family issues. The effects also extend further than you may think, as financial stress impacts employees AND their employers.
For employees, it leads to anxiety, depression, shame, and could affect their relationships with their friends, family, coworkers — and how they feel about their job. 77% of employees stressed about their finances say it affects their physical health, 52% say it affects their mental health, and those under duress are twice as likely to look for a new job.
Financial stress also has employees delaying or avoiding medical care that could have tremendous consequences down the road for their health, and for employee and employer finances. Health issues and costs due to missing preventive visits and delaying or postponing care have negative effects on individual employees, but can also drive more expenses for employers.
For employers, they’re experiencing more absences (planned and unplanned) and reduced productivity. 45% of financially stressed employees report it affects their productivity, losing an average of 11.4 hours of work per week. Additionally, workers report that declining financial health affects their engagement (47%). It’s estimated that employers lose over $4 billion per week in productivity and engagement due to financial stress.
Now may be the perfect time to reassess current benefits packages. What was once popular and impactful before the pandemic, like commuting perks or free food or drinks in the office, don’t make as much sense when more people are working hybridly or full-time from home.
A whopping 97% of employers feel a “sense of responsibility” for their employees’ financial wellness. 82% of employees also believe their employer should support their financial wellness since their employers likely have more ability, connections, and expertise to give employees financial wellness support they can’t access on their own.
John Hancock found that nearly 90% of workers want their employers to provide financial wellness programs, and 66% felt that access to a financial wellness program would make them more likely to stay with their current employer.
Unfortunately, nearly 4 out of 5 HR leaders say employees have requested support that the company does not offer.
So what are some of the best ways to assist their financial wellness?
Financial education is the foundation to financial wellness. Educating employees on the financial basics sets them up to make sound decisions in the short-term and properly plan for longer-term goals.
It’s important to discover which topics employees need more support with, especially if they aren’t taking advantage of current benefits that could help their present situation. By providing educational tools to help employees better understand which programs might help them, you can take a strong first step in retaining your best talent.
And it may not even be the topics you think of: Thrivent found 70% of parents haven’t discussed how to manage their money or set financial expectations with their adult children. And as an added disconnect between the generations, 72% of those adult children who moved back home believe their parents can financially support it, while only 21% of parents agree.
Meeting employees and their families where they need it to learn more about banking, how to navigate financial advice on social media, investing in stocks and more at an early age helps them make better decisions early and see the positive impact throughout their lifetimes.
It’s hard for many people to ask for help with their finances. What confidants do you trust to talk to about such personal and emotional matters, and better yet, do they even really know what they’re talking about? Instead of having your employees Google “how to pay off debt” or ask a potentially unqualified friend, give them access to a financial advisor who can sit with them to formulate a true financial plan.
Providing easy access to a trusted financial advisor/financial planner for free helps consumers get a personalized, 1:1 experience that helps them navigate everything from market to major life and goal changes. Employees may also be wary of trusting resources they find online, but they do trust their employers to give them reliable referrals and financial information.
84% of employees said they want access to advice from a financial professional provided by their employer. A financial professional can help them with everyday financial questions and needs, as well as managing debt, budgeting, financial planning, and setting retirement goals.
Basic financial advice could also transition to more advanced planning assistance on generational planning, tax strategies, wealth preservation, and more, depending on employee needs.
Standing annual meetings with financial professionals act similarly to our routine physical checkups because after all, a lot can happen in a year. These meetings can ensure employees stay on track depending upon if their work situation or retirement goals change.
Having a strong financial education and access to a financial professional are two major steps prior to making the biggest buying decision of anyone’s life — buying a home. But some are taking it a step further by offering down payment assistance programs.
Employers are providing education, resources, AND matching funds to assist their employees finding and financing the purchasing of their home. Home ownership is known to be a huge factor in providing generational wealth, overall financial well-being, security, and stability.
Here are just a few ways employers are providing down payment assistance:
Due to the rising costs of higher education, the conversation about student loan repayment is at an all-time high. And for good reason.
43 million borrowers currently have federal student loan debt. The average debt balance they carry is $37,667, and the average student loan payment is nearly $400 per month.
Even recent proclamations around student loan forgiveness won’t cover the majority of student loan debt. In many cases, parents make up the difference by taking out loans themselves — leaving both generations in debt.
Effective programs that help your employees manage their (or their children’s) student loans can offer customized recommendations on which loans to pay off first, which to delay, and give them a financially sound plan of attack. This can help alleviate the stress of not knowing where to begin with what may seem to them like an insurmountable feat.
The most popular retirement savings strategy is a 401(k) plan, which allows contributions to be payroll-deducted before income taxes are calculated, giving employees — and employers — significant tax savings.
Currently, not enough workers are saving for retirement. Those who are doing it aren’t contributing as much as they should, aren’t doing it early enough, or are withdrawing from it prior to retirement for a myriad of reasons.
Getting employees into a 401(k) as soon as they can lets them take advantage of interest over decades instead of the middle or end of their careers. Making it a habit immediately also provides the psychological benefit of not missing out on something you never had. Because if you never see what your paycheck would be without 401(k) money being taken out, you’re not as likely to pine for something that you once had.
Another tactic to consider is auto-enrollment. Employee participation rates more than double when plans have an auto-enrollment feature.
Small businesses can also receive tax benefits for offering an employer-sponsored 401(k) match that helps employees prepare even more for their future. And, by reducing the average retirement age, employers can save an estimated $16,667 per employee.
As a bonus, the IRS announced that the 2023 contribution limits for 401(k)s will increase, giving employees even more flexibility and opportunity to save for retirement.
We’re all told as kids to save money for a rainy day. But it’s a hard thing for many Americans to do when they’re trying to pay bills, save for retirement, and care for children and/or an aging parent.
Emergency money to set aside for “when life happens” often falls to the wayside. Unfortunately, the statistics overwhelmingly support the case for establishing emergency funds.
Sixty percent of Americans experience a significant loss of income or a major unexpected expense, and 33% experience two or more per year. These costs are typically around $2,000 — which is a half month’s worth of income for the median household — and 70% of those who experience it don’t have emergency savings.
On top of that, a 2022 Personal Capital Wealth and Wellness Index report showed only 53% of Americans could handle an unexpected $500 expense without a problem.
Research shows that up to 90% of employees would use an emergency savings program if their employer offered it. This program deducts money directly from a paycheck to put it in an interest-generating emergency savings account to cover unforeseen expenses.
It’s a low-cost way for employers to offer employees short and long-term financial security. Employees avoid financial hardship due to not having to take out an extremely high-interest loan. Plus, this quick access pairs well with a purely long-term benefit like a 401(k), and it has the added benefit of providing employees with a more reasonable alternative to a premature 401(k) withdrawal.
One study found that low and moderate income employees with emergency savings accounts were 70% more likely to contribute to their defined contribution plan. So not only does it help workers avoid high-interest loans, overdraft fees, subprime credit scores, and diving deeper into debt, it’s also a predictor to increasing savings and, ultimately, building wealth.
An emergency fund combined with access to a financial professional has proven to reap positive results as well. 79% of employees didn’t speak to a financial professional when a major life event occurred, but 97% of those who did said the interaction was valuable.
Some companies are getting creative by providing more flexibility or more immediacy in how they’re paying their employees. Converting paid time off (PTO) into payments against student loans, 401(k) contributions, or other financial endeavors is a new and innovative way to assist employees on their journey toward financial wellness.
If you’re considering offering these types of services, it’s important to make sure your employees avoid mental and physical burnout by still taking PTO when needed to recharge their batteries. Converting PTO to money isn’t about never taking any time off in order to get every last dollar, it’s about finding the appropriate work-life balance while also trying to achieve better overall financial health.
Future-focused companies have also tried implementing on-demand pay, which lets employees access their already-earned wages immediately. Now, this isn’t a free loan system. It’s just a method that allows employees to get money due to them faster so they can invest it, pay down debt, or avoid high-interest loans should a financial emergency arise.
How many times have your employees said, “I didn’t know we even had that” in response to your benefit offerings? Too frequently workers aren’t sure what benefits are offered, don’t know how to sign up, or they’re confused about what would be of use to them during open enrollment.
Provide proactive, consistent, clear, and concise communications on what’s available to employees and how it can help them. 78% of employees said they want employers to communicate more frequently on financial wellness benefits offered.
Ease provides email templates to assist you with these communications. You can use them as is or alter them to fit your needs for targeted campaigns to make sure employees know what’s available at open enrollment, what the deadlines are for completion, and link to helpful resources and education to assist their selections.
Employers can also conduct pulse surveys to quantify the value of what’s being offered to employees, how they’re using these benefits, see what gaps exist, and even perform financial wellness assessments to track their current situation. They’re great opportunities to ask employees for feedback on what’s working, what’s missing, and what’s not of use.
Providing financial wellness services to employees has proven to help businesses increase on-time retirements, reduce employee turnover and their associated costs, decrease absenteeism, and improve employee productivity. These benefits are critical in improving employee satisfaction, as well as their emotional, physical, and mental health.
Ease has a simple-to-use benefits administration and HR solutions platform that can support all of your offerings from open enrollment and beyond. Your employees can easily see what’s available to them.
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