Financial Wellness Programs Benefit All Workers
Financial wellness programs are no longer just a benefit of the highly paid employees. Employers can structure financial wellness programs to benefit the lower-paid employees as well. These tactics are not required to be expensive or complex, which is a relief for employers who, in many cases, are struggling to justify the cost of implementing financial wellness programs.
A new study from Boston-based financial services firm Commonwealth looks at the impact of financial wellness programs on workers who are earning less than $60,000 a year. These include small steps to better financial wellness, like splitting direct-deposit checks between checking and savings accounts, automatic bill-payments, and access to low-interest loans. According to the study, “Rise with the Raise: The Promise of Straightforward Employer Benefits for Building Lower-Wage Employee Security,” 74% of employees said they’d feel less stressed and more confident about their financial situation if their employers offered them the opportunity to save coincident with a pay raise.
According to BenefitsPro, which cited the Commonwealth study in a recent article, employers should consider embracing financial wellness program for employees who are on the lower end of the pay spectrum. Indeed, there are opportunities to move the needle. In fact, 65% of low-wage employees said they’re struggling or just getting by. Moreover, 43% of respondents said they had less than $400 set aside. They aren’t alone. The majority of Americans struggle with financial wellness and preparedness. Commonwealth’s findings are consistent with a study from the Federal Reserve that came out earlier this year, which found that 40% of American adults don’t have enough savings to cover a $400 emergency expense.
Many Americans struggle to save. The biggest hurdle? Making savings a consistent habit. Employers can help foster better financial wellness by implementing automatic savings for employees with every paycheck. Employees would likely welcome this, as 45% of the respondents to the Commonwealth survey said they did not save regularly. Nearly 77% said they didn’t save more because they believed they couldn’t afford to. Moreover, while 55% said they set some money aside every month, just 24% said they saved a fixed amount. The other 31% saved whatever was left at the end of the month. Financial wellness education may help employees to understand the concept of paying themselves first, thus increasing savings rates.
Commonwealth also found that employees’ probability of being able to save rises by 2% for every additional dollar earned up to $20 an hour.
However, for many employees, debt can be a big obstacle to saving. Eighty percent of the respondents to the Commonwealth survey was in debt, and 67% of those said paying off debt was their top priority. More than 50% had $10,000 in debt over and above their mortgage. Credit card debt was the most common type — 55% copped to carrying balances. Here again, financial wellness programs in the form of debt management and debt consolidation may help employees to better manage their expenses and pay down debt so they can clear the way for better savings habits in the future. It starts with baby steps, however, and employers can use financial wellness to nudge their workforce in the right direction.
Employees want help from employers to improve their financial wellness. Sixty-two percent of those Commonwealth surveyed said they’d be inclined to work harder at their jobs if their employer offered financial wellness program benefits at the time they receive a raise; 62% said they’d be more productive, and 76% said they’d be more likely to stay with the company.
Employer-sponsored financial wellness programs can help to not only improve employees’ overall financial well-being, they can also boost loyalty and retention. These are good metrics by which employers can begin to measure the efficacy of financial wellness programs and thus, help to justify their costs.
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