ARTICLE
How employers can help increase their employees’ financial health
Many employers offer a slew of benefits to employees around physical and mental wellbeing to keep employees healthy, happy, and productive. Now, a new effort should be considered if it is not already: employees’ financial health.
Employees’ Financial Health is Good Business & Well Meaning
Financial health is an unofficial term to describe how people feel about money. Are they stressed about finances? Being able to retire? Paying for a kid’s college education? The list could go on, and companies that make a solid effort to reduce employees’ stress around money is not only compassionate—it is also often good business.
Studies show financial health is becoming increasingly important for companies since people worry about money to a large degree. Covid-related savings levels are dropping, credit card balances are rising, and student loan repayments recently restarted after a pause during the pandemic.
How bad is it?
Even as the economy continues to perform well and the labor market remains tight, many people are worried about money. Rightly so. More than 60% of Americans live paycheck to paycheck and more than 40% cannot afford a $400 emergency expense.1
Savings is another issue. A recent survey found less than 30% of the respondents have saved nothing for the future, and almost 40% said they currently do not contribute to their retirement account. What’s more, 30% of the respondents said they did not think they would ever be able to retire because of financial constraints.2
Geopolitical issues, housing affordability and inflation also weigh on many people’s minds regarding finances.
“We find all of our clients value their employees and do what they can to alleviate work related stress and grow morale by throwing company barbeques or doing monthly giveaways,” said Steve Fletcher, senior retirement plan advisor with 1834. “It does not need to be complex, and employers do not have to recreate the wheel to improve the financial well-being of their employees. A key step to alleviating stress pertaining to financial health for your employees, is partnering with your retirement plan providers (advisor, recordkeeper, etc.) to plan out a course of action.”
Employees that worry about finances can also harm a company’s bottom line. U.S. companies collectively lose $4.7 billion a week due to employees’ stress around money.3 The number might be alarming, but the rationale is simple; employees who do not focus on their work because of stress are less productive. Also, when employees work longer in life than they want to, their enthusiasm and interest in the job can often fade which leads to issues. Giving employees the financial tools and education to feel comfortable about their money and retiring when they are ready and want to is the key. Employers can help their employees gain confidence by providing education and access to financial tools designed to help the employee navigate their financial situation.
What employers can do.
Empowering employees to make good decisions is cliché, but it’s true. Employers offering financial literacy, education and savings programs is gaining steam in many industries. It is also often a good idea. It should also be noted, many of these initiatives are relatively inexpensive.
For employers, the direct return on investment could be as much as $3 for every $1 spent on financial wellness programs, acording to the Consumer Financial Protection Bureau.
“When evaluating ROI, it’s important to measure employee engagement and track utilization of the various resources being offerred,” said John Randall, a retirement plan advisor with 1834.
Some actions employers can take include offering:
- Education on Lifestyle Spending Accounts (LSAs), which are a newer tool. These allow for taxfree contributions to accounts that help with everyday expenditures.
- One-on-one financial coaching.
- Access to basic legal document resources, such as writing a will or a healthcare power of attorney.
Additionally, within the Secure 2.0 Act, there are several new features available to retirement plans, including:
- Employers are adding Emergency Savings Accounts (ESAs) to benefit packages. ESAs are employee-owned accounts that are funded with payroll contributions and can be subsidized by employers.
- Employers can provide for matching contributions on the basis of employees making qualified student loan payments.
- New auto-portability features (which are still being implemented) that help employees keep track of their retirement savings and make it easier for employers to administer their plans.
If employers invest wisely in employees’ financial health, it often will payback numerous times over through increased productivity, retention and morale. As always, reach out to your 1834 team with any questions.
3 https://www.benefitspro.com/2021/08/18/financial-stress-costs-u-s-companies-4-7-billion-per-week/