We know the pandemic has challenged the physical health and emotional wellness of employees. But it has also intensified an epidemic of personal financial insecurity that was already a significant threat to employee wellness before anyone heard of COVID. Your employees’ personal financial insecurity was and is a threat to the success of your organization, since financial stress among employees is linked to higher healthcare costs, reduced on-the-job focus and productivity, and higher rates of turnover.1 One answer is an increased emphasis on financial wellness benefits.
Financial Insecurity Is All Too Common
Even pre-COVID, 78% percent of Americans were living paycheck to paycheck.2 Forty percent of Americans were unable to come up with $400 for an unexpected expense.3 Millennials, who now make up the largest demographic segment of the workforce, were struggling with student debt; in fact, a fifth of those who took out loans to attend private colleges were behind on their student loan payments.4 And nearly 50% of Americans had less than $10,000 saved for retirement.5 What’s more, financial insecurity was trending in the wrong direction. In the two years between 2018 and 2020, the number of employees who rated their financial wellness at “good” or “excellent” dropped by 12%, to under 50%.6
COVID Hit Family Finances Hard
For many, COVID made a bad situation worse. At the end of May 2020, as the pandemic wreaked havoc on the economy, nearly 3 in ten Americans found it necessary to dip into their retirement savings to make ends meet.7 In another survey, 47% of those with retirement savings programs had either stopped or lowered the contributions they made towards that goal.8 Meanwhile, 12% of employers found it necessary to stop or decrease their retirement plan matching contributions.9
Today, we’re looking forward to the end of the pandemic and a return to normalcy, but those money worries haven’t gone away. In a study published in March 2021, 48% of companies surveyed said that financial stress continued to have a significant impact on their employees.10 That’s why 48% of employers say COVID-19 has heightened the importance of offering financial wellness benefits.11
The Big Two Challenges: Student Debt and Retirement
The two biggest issues before the pandemic, student debt for Millennial workers and inadequate retirement savings among Baby Boomers and Gen Xers, loom larger than ever. And it’s clear that the near-term financial stress of student debt is setting Millennials up for more trouble down the road, since, within several months of the start of the pandemic, 17% of Millennials also paused contributions to their retirement funds.12
Recognizing how big a problem debt is for Millennials and how important Millennials are to their future success, companies have begun to offer help in the form of student debt advice, refinancing, and repayment. Twenty percent of companies said they were going to add student loan guidance and refinancing to their benefits offerings, and 18% said they were adding student loan repayment.13
Since many retirement accounts became financial lifelines, and because even employees who didn’t borrow from retirement funds fell behind in making necessary contributions, companies are suggesting plans and strategies for making up that lost ground—something that’s important for all workers, but especially for older Gen Xers and Baby Boomers nearing retirement age.
Help Address Near-Term Challenges, Too
Companies are also helping with near-term financial challenges by introducing benefits such as flexible pay or early wage access, and debt counseling services.
The Importance of Boosting Financial Literacy
What the pandemic made painfully clear is that many people need help understanding financial matters, and guidance making the best possible decisions for themselves and their families. So, successful financial wellness efforts must include features such as a financial wellness assessment, individual financial coaching, and how-to courses on budgeting and managing credit card debt. Many companies are implementing webinars and interactive tutorials to help improve financial literacy. It doesn’t have to cost you a lot of money. For example, your employees can access a free online program from the National Endowment for Financial Education (NEFE) called “Smart about Money.”
Financial Wellness Works
Eighty-eight percent of employers say that the financial wellness benefits they offer have resulted in improvements for their employees and their companies.14 If you embrace financial wellness, you can save healthcare dollars and have happier, more focused employees. And with 91% of companies that offer financial wellness benefits reporting they have been able to use those benefits to improve retention and recruiting, it can be a competitive advantage, too.15
Editor’s Note: TASC offers over a dozen financial wellness benefit accounts from Health Savings Account and Student Loan Reimbursement Account to Emergency Medical Loan Account and a Home Office Account with more than 50+ benefit offerings that can be configured into custom plans that meet employee needs – where they are in life.
Sources:
- “New SmartDollar Research Find the Post-Pandemic Workplace Must Include Focus on Financial Wellness,” Businesswire, March 2021: https://www.businesswire.com/news/home/20210303005549/en/New-SmartDollar-Research-Finds-the-Post-Pandemic-Workplace-Must-Include-Focus-on-Financial-Wellness
- “What does financial wellness look like after COVID?” Benefits Pro, July 2020: https://www.benefitspro.com/2020/07/08/what-does-wellness-look-like-after-covid/
- “Report on the Economic Well-Being of U.S. Households in 2018,” U.S. Federal Reserve System, May 2019: https://www.federalreserve.gov/publications/files/2018-report-economic-well-being-us-households-201905.pdf
- “What does financial wellness look like after COVID?” Benefits Pro, July 2020: https://www.benefitspro.com/2020/07/08/what-does-wellness-look-like-after-covid/
- “Employers Feel More Responsible for Employees’ Financial Wellness,” SHRM, October 2020: https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/employers-feel-more-responsible-for-employees-financial-wellness.aspx
- “Financial Wellness Post-COVID-19,” CAPTRUST, July 2020: https://www.captrust.com/financial-wellness-post-covid-19/
- “3 in 10 Americans Withdrew Money From Retirement Savings Amid Coronavirus Pandemic…,” Magnify Money, May 2020: https://www.magnifymoney.com/blog/news/early-withdrawal-coronavirus/
- “Financial Wellness Post-COVID-19,” CAPTRUST, July 2020: https://www.captrust.com/financial-wellness-post-covid-19/
- “New SmartDollar Research Find the Post-Pandemic Workplace Must Include Focus on Financial Wellness,” Businesswire, March 2021: https://www.businesswire.com/news/home/20210303005549/en/New-SmartDollar-Research-Finds-the-Post-Pandemic-Workplace-Must-Include-Focus-on-Financial-Wellness
- Ibid.
- “3 in 10 Americans Withdrew Money From Retirement Savings Amid Coronavirus Pandemic…,” Magnify Money, May 2020: https://www.magnifymoney.com/blog/news/early-withdrawal-coronavirus/
- Well-Being Programs, Voluntary Benefits Help Stressed Employees Cope,” SHRM, July 2020: https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/well-being-programs-voluntary-benefits-help-stressed-employees-cope.aspx
- “The 2021 Financial Wellness Benefits Study,” Ramsey SmartDollar, 2021: https://cdn.ramseysolutions.net/cms/sites/smartdollar-com/Research/2021/2021%20Benefits%20Study.pdf
- “New SmartDollar Research Find the Post-Pandemic Workplace Must Include Focus on Financial Wellness,” Businesswire, March 2021: https://www.businesswire.com/news/home/20210303005549/en/New-SmartDollar-Research-Finds-the-Post-Pandemic-Workplace-Must-Include-Focus-on-Financial-Wellness
