Inflation, supply chain destabilization, and fears of a global recession have made many Americans worse off financially than they’ve ever been. More than two-thirds of Americans are worse off financially today than they were a year ago, according to a recent study conducted by Salary Finance, and almost one-third run out of money at least once a month between paychecks; nearly 60% run out every 1–2 months.
Companies are taking action—their employees are struggling financially but, at the same time, have more job opportunities than ever before, and some are providing more financial coaching. More than 40% of employers are offering personalized coaching, counseling, and/or planning.
Financial coaching is a helpful option to make available for employees. Employees who work with a financial coach may:
- Gain a better understanding of their financial history and habits.
- Obtain educational resources around debt, saving, and retirement planning.
- Get much-needed help with budgeting and financial planning.
- Receive appropriate workplace benefits for each individual’s situation.
Employers can do more, however. While the intention behind financial coaching and supporting financial education platforms is good, the impact can be tough to measure. Ultimately, financial coaching provides a good road map for financial well-being, but employees often need help right away to navigate their journey.
Financial Stress Plagues Employees
According to a recent Morgan Stanley study on workplace financial benefits, nearly three out of four workers report that financial stress and money-related stress negatively affect their work and personal lives, and they expect their workplaces to address it. Our own research found that three-quarters of employees believe their mental health would improve if their employers provided financial well-being support and benefits.
For a number of reasons, companies today cannot let financial wellness go unaddressed. On a practical level for the business, it’s affecting work. More than 20% of employees spend more than 5 hours during the workweek worried about financial issues.
Companies that address financial well-being are already seeing the benefits. According to Bank of America’s Workplace Benefits Report, more than 90% are seeing an increase in employee satisfaction after putting financial well-being support and benefits in place, and nearly two-thirds of employees said they would be more likely to stay at a job that offered useful debt-related benefits.
Expand Your Financial Benefits Beyond Financial Coaching
Employees who use financial coaching, especially those most in need of support with issues like lower credit scores, likely need additional resources to put these plans into practice. This includes access to financial products that may fall outside of the typical options available (traditional banking products that cater to a consumer with a good credit score).
Having more inclusive financial products readily available (and ideally available through their workplace) will help the employees who need help the most to follow their course, especially when it comes to debt management.
Financial well-being comprises the following four elements:
- Control of day-to-day finances
- The ability to enjoy life now
- The capacity to absorb financial shocks
- The ability to pursue longer-term financial goals
When asked what financial benefits they want, employees most commonly mention programs that help them save money and/or pay down existing debt. When we surveyed 3,001 American workers on what new voluntary financial benefits they’d be most interested in, nearly two-thirds said one that helped them save more money. More than one-third said they wanted something to help them pay down existing debt or high-interest loans. At the bottom of that list were financial education programs.
With an eye toward building savings and managing debt, what benefits can companies put in place to best help employees?
Emergency Savings Provide Peace of Mind
Employer-sponsored emergency savings programs can help keep workers who suffer from a financial shock stay afloat in a time of need without having to rely on credit cards or take on high-cost debt. Even without a financial shock, it’s good practice, particularly during a recession, when money can get tight quickly, for workers to have an adequate amount of money saved for a rainy day. Getting people who are in debt out of it is a hard undertaking, but salary-linked savings programs can simplify things for workers. In this instance, a predetermined amount is drawn from an employee’s paycheck directly and put into a savings account. Especially attractive to employees are the types of programs that include a cash incentive to build and maintain a certain level of savings.
Affordable Credit Access Enables Workers to Get Out of Debt and into Savings
Employees can pay down current, higher-cost debt through company-sponsored loan programs, which can help employees by reducing monthly interest payments, easing budgets, and shortening the distance to most financial goals. Like savings programs, loans that are deducted straight from payroll simplify the payment for employees, who benefit from having cheaper loan terms in the event they get hit with unexpected medical emergencies, family emergencies, car repairs, or moving expenses.
For companies that have already established financial coaching and education programs, good. Employees do need them. However, companies that think they’ve addressed their employees’ financial stress issues with just an education program must go deeper to provide employees with the tools for financial success. The country and its workers are going through tumultuous and, for many, unprecedented financial hardships. By putting employees first and giving them more than just guidance, companies can help them through troubling times—and create some goodwill and loyalty, too.
Asesh Sarkar is Global CEO at Salary Finance.