Chief Engagement Officer, overseeing the full Human Resources Department and contributing to a high-performance culture at Businessolver.
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Let’s face it: 2020 didn’t give many of us much to celebrate, especially those of us working in human resources and employee engagement. A global health crisis, an economy in freefall and cultural unrest leading to tense racial reckonings — our career cup runneth over, and not in a good way.
However, it turns out that there is a silver lining to the gray cloud that was 2020, and we found it just in time for Financial Literacy Month. Although it’s celebrated every April, Financial Literacy Month traditionally doesn’t give HR a great deal to cheer about, and there was no reason to believe this year would be any different. Still, our “2021 MyChoice Recommendation Engine Benefits Insights Report” reveals that there is indeed something to celebrate this Financial Literacy Month: Despite the pandemic, a fair share of employees are better prepared now for an unexpected financial crunch than they were before Covid-19.
The data show that, amid the worst intersection of health and economic crises, a third of employees reported that they always were able to spend less than they earn and regularly set money aside for saving. While that number obviously isn’t as high as we’d like it to be, consider that it comes from the height of uncertainty around the pandemic, and that in 2019 the number was even lower (26%) despite far greater economic prosperity.
The news is better still for women, who consistently lag behind men in nearly all financial metrics — base pay, savings rates, retirement plan balances and overall financial health. The number of women who said they never spend less than they earn fell to just 6% in 2021, after being measurably higher two years prior.
But. (You knew there had to be a “but,” right?)
Before we get carried away celebrating all month long, it’s important to mention that there are segments of the workforce that need help with financial literacy. Our data shows that, unsurprisingly, employees earning the least are struggling the most. In addition, 2020 research from Financial Health Network reveals that employees of color are more financially vulnerable than their white peers.
And — for stats that could knock the wind out of us HR leaders — a Gallup poll taken last fall shows that:
- 27% of U.S. workers are still concerned they’ll be laid off.
- 28% worry their pay will be reduced.
- 30% are concerned their benefits will be reduced.
A lot of difficult choices were made last year around staffing and resources. But as organizations begin to recover, we have to remember to bring our employees along with us — especially since they’ve clearly done their part to shield themselves financially as best they could. And now employees are looking to us to help them: an FHN report for Morgan Stanley also found that “nearly 75% of employees believe it’s important for employers to offer financial wellness benefits, 71% would be open to receiving personal finance support at work from a financial professional and 60% would be more likely to stay with an employer that offered useful financial wellness programs.”
The good news is that we can offer the support they’re asking for, during Financial Literacy Month and all year round.
1. Don’t encourage retirement plan borrowing.
Most financial experts strongly warn against taking loans or hardship withdrawals from retirement savings plans, and HR leaders can be an echo chamber for that advice. Borrowing from a retirement plan if of course tempting for employees in current financial distress.
But at the end of the day, doing so can put a slow leak in their financial life raft. Employers understand this better than most employees, so let’s make it as difficult as possible to tap into retirement savings while effectively promoting other benefits that offer financial support.
2. Do offer accessible alternatives to predatory lending.
From hidden fees to exorbitant interest rates, payday loans are arguably the worst option for financially stressed employees. Largely unregulated, payday loan interest rates vary widely across states, from 154% in some to upwards of 600%.
Unfortunately, 2% of Americans say they would need to use a payday loan to cover a $400 emergency expense, according to data from the Federal Reserve; 12% say they wouldn’t be able to pay the $400 expense by any means.
Six hundred percent interest on a $400 emergency loan literally adds insult to injury. We HR leaders can be an effective line of defense against their predatory business practices through innovative offerings like allowing employees to cash out paid time off.
3. Don’t communicate financial benefits in isolation.
The bottom line is that every benefit comes from a finite source of money for employees, and there’s no better evidence than the fact that 1 in 4 Americans said in 2019 they either considered skipping or did skip going to the doctor because of an inability to pay medical bills.
So, it doesn’t make sense to communicate to employees the advantages of a financial wellness benefit without also talking about how to more effectively manage health care spending.
4. Do communicate emotional supports as well.
Financial stress leads to other types of stress, mainly emotional or mental. That connection between financial stress and emotional stress only makes your employee assistance program or paid time off policy all the more important. Just like your company’s benefits address holistic concerns, employees are whole people. The more you support them in all areas, the better off they’ll be.
It unfortunately may have taken a global pandemic to get them there, but employees are doing the hard work of saving for a rainy day, rather than making it rain. The least we can do for them as employers is reward them with a bigger umbrella.
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