Employee financial wellness is becoming a huge topic of discussion amongst employers and benefits decision makers.
According to a survey of more than 10,000 US employees across a variety of industry sectors, 48% of employees are financially stressed out. As a result of that financial stress, those employees are 8 times more likely to have restless nights, 6 times more likely not to finish daily tasks, 4 times more likely to have troubled relationships with colleagues, and 2 times more likely to be looking for a new job. All of this together costs employers 11-14% of their total payroll expense, or nearly $500 billion annually for corporate America as a whole.
Contrary to popular belief, employers do have a real opportunity to positively impact the financial wellness of their employees. Unfortunately, there are several large misconceptions that prevent employers from thinking this way.
Myth #1: Financial education and financial wellness go hand and hand
Many employers want to believe that providing their employees with financial education and tools (calculating APRs, budgeting, planning, etc.) allows them to achieve financial wealth. However, even if an employee understands finances, financial wellness is about changing spending, borrowing and savings habits. It's important to include financial education in your benefits strategy, but it does not equal financial wellness.
Myth #2: It's an employee's problem, not the employer's
According to the 2019 Edelman Trust Barometer Global Report, Americans believe employers are more trustworthy sources of information than government and media. A vast majority of employees (68%) feel that their employers care about them and their wellness, and 79% trust their employers when it comes to issues around personal finance.
Most employers already offer basic financial planning and wellness benefits such as a 401(k) plan and health insurance. Many employers also provide guidance to help employees arrange the most beneficial programs for them, and are able to reduce or eliminate specific costs or fees on employees’ behalf thanks to economies of scale.
The mondern leading employers understand that they can help their employees in this area and are providing benefits such as financial education, student loan assistance programs, home buying assistance programs, low cost loans, etc.
Myth #3: As long as we have a mental wellness strategy, we don't need a financial one
Mental wellness and financial wellness are connected and always will be. How can an employee be mentally well if they're not sure how they'll be paying for groceries, rent, or utilities? Employees with financial worries are 340% more likely to feel anxious and be prone to panic attacks and 400% more likely to be depressed and suicidal.
Due to stats like the ones above, a mental wellness strategy cannot be successful without an intricate financial wellness strategy in place. Ignoring financial wellness while promoting mental wellness neglects to recognize financial wellness as a major driving force behind a person's overall wellness.
Myth #4: Financial wellness is about income
Although financial wellness does involve income, a higher income does not indicate a higher level of financial wellness. Many people believe that a pay raise would solve their financial problems, but the data says otherwise. About 26% of. employees who earn more than $160,000 annually regularly run out of money before payday.
Myth #5: Financial wellness is a problem for a minority of financially illiterate people
Research shows that even employees who consider themselves to be financially literate are worried about their finances. For example, employees who aren't necessarily financially stressed may still have a heavy debt load to deal with. Alternatively, employees who are financially stressed may be subprime borrowers or credit-invisible. In either case, improving financial wellness is the solution.
Additionally, a recent Federal Reserve Survey found four in 10 American adults wouldn’t be able to cover an unexpected $400 expense with cash, savings or a credit-card charge that could be quickly paid off. Once in debt, these individuals don’t have many options.
Credit cards can be expensive – typically charging interest rates of 20%+ for unpaid balances, and banks are often unwilling to assume the risk of lending to those with low credit scores. This forces many people turn to payday loans, which typically charge rates of 400%+, sparking a cyclical spiral of debt.
To learn more about what can be done, visit the original article linked below.