Why Employees Need Financial Wellness Benefits | Savings and Budget

When it comes to financial benefits at work, employers often offer a 401(k) retirement plan option, and that’s about it.

But both economists and human resources experts suggest that expanding financial wellness benefits in the workplace could be a cost-effective way to quickly address the staggering number of Americans living paycheck to paycheck, struggling with credit card debt. and student loans, and experiencing stress around your personal finances.

The following Q&A with leading industry experts explores how we define financial wellness after the coronavirus pandemic and the various types of financial wellness programs available today.

Q: How do you define financial wellness?

Annamaria Lusardi, academic director of the Global Financial Literacy Excellence Center at the George Washington University School of Business: As the word says, it means having a 360-degree view on people’s personal finances.

We looked at some indicators of what financial wellness is and what can be achieved, and I want to mention five, which is a kind of financial review that we can do to our employees and to people in general.

First, do people have the financial skills and knowledge to navigate the financial decisions we all have to make? Second, do we have the ability to deal with unexpected shocks that might otherwise derail our path? Third, are we debt constrained or can we manage and meet the debt obligation? Fourth, can we plan and save for the future? Finally, can we take advantage of all the benefits that employers offer to improve our personal finances?

It means looking at people’s personal finances well beyond their retirement savings. As an analogy I want to say that it is like the check-up we do every year when we go to the doctor or what we do to our car, for example, when we take it to the mechanic. We want to do prevention. We want to make sure that we really are living well and are satisfied that we can do well with our personal finances.

This is important because if you are a young person, you are starting your financial life today in debt, probably with student loans. We all face an increase in risk: It could be the risk of climate change, it could be just the risk of macroshock, like we’ve experienced with the pandemic and war, and it could also be being much more in charge of our financial security in the short and long term.

Q: How has the coronavirus pandemic further exacerbated existing issues around financial education and the need for financial wellness support?

Alexander Alonso, knowledge director of the Society for Human Resource Management: We’re experiencing a macro shock like one that we haven’t seen, honestly, since World War II, and one of the things that we’re seeing from a financial perspective is that organizations are actually reducing the amount of benefits that they offer when it comes to learning. , on the whole. In fact, we know that only 45% of companies offer this, and then when they do offer it, utilization increases by almost 20%.

We’ve seen something of a shift in the organization’s priorities, and it’s no surprise that this has happened. When we talk specifically about the pandemic, more often than not CEOs (chief experience officers) and (HR directors) point to one thing that stood out to them as an immediate need that arose because of the pandemic: it was real wellness and mental health. The problem is that this diverted energy and attention from the basic skills related to financial education.

Consider two other statistics: Only 60% of working Americans said they could survive a macroeconomic shock for more than four months, and only 7% said they felt they had the financial education to survive and keep their jobs. finance. and your financial planning goes. That is an indication from working Americans that they themselves feel unprepared for what we have experienced. We have seen a completely different perspective, both from the worker and from the workplace.

Q: Many employers are looking to address some of those issues. What do these programs actually look like when implemented?

Diana Witkowski-Grubard, director of human resources for Northwell Health: In 2014, we had one of those typical surveys where you answer a bunch of questions and nothing happens at the end. We leave you high and dry. There was no follow up. We really started to get more interested in promoting our retirement plan specialist. We started encouraging our employees to start planning for their retirement and meet with a plan specialist.

But then in 2018 we started to evolve our program looking to create a user experience that would take our employees through a journey. We are not all doctors and executives. We want to deal with that population, but also how do I begin to meet the needs of those who traditionally don’t fall within that financial reach and how do we begin to educate them?

Our financial wellness program really breaks down into three main components. We have a digital education experience, and it’s designed to measure and improve financial wellness by exploring a variety of topics based on your individual needs. You then fill out a survey and based on your answers you will go on a journey and that information will be provided to you in a number of different ways.

We also try to offer workshops on hot topics like cybersecurity and cryptocurrencies, which are not typical financial education topics.

The last component for us is our financial planning. We allow our employees to sit down with a designated financial planner to discuss their individual needs. And that has been a great success. We really want a program that meets the needs of all of our employees, where there is something for everyone and is really easy to access.

Q: Thinking of employees across the pay spectrum and from a variety of different backgrounds, is there one group or groups that most need financial wellness benefits?

Dani Pascarella, Founder and CEO of OneEleven Financial Wellness: In America, the bar is abysmally low. There really is nowhere to learn these things, and we really struggle to develop those healthy habits.

Four out of five Americans are paycheck to paycheck, even if you look at millennials who earn six figures. People with high incomes and young people, it is still 60%. So these bad habits, by not learning the right way to do things from a young age, affects all income levels.

And if you look specifically at 401(k)s, for example, which is the most common benefit you’ll see, among white families, 65% are contributing. When you look at black families, that drops to 44%. Among Hispanic families, it is 28%. And then when you look at gender, men have three times more retirement savings than women. So from a demographic standpoint, this is a massive diversity and inclusion issue if you only offer a 401(k) and offer nothing to help people who would love to contribute to retirement but can’t afford it yet. that’s because maybe you’ve been dealing with a pay gap your whole life.

Q: Looking ahead, what do you forecast for the future of financial wellness?

Lusardi: I think this is a unique opportunity to use the time we’re in right now to use what we’ve witnessed, for example, during the pandemic and how important it is to be prepared for the unexpected, to really reinvent the future. We cannot go back to what was before the pandemic because that was not good enough.

We need help. It is more difficult to find resources and resources that are reliable, and that is why the employer can be an incredible source of help and information. This is often what the employee wants. It can be very profitable, especially if you have a very large workforce.

Look at how vulnerable people are to shocks: how low financial literacy is, the fact that we have nothing in school, for example, the fact that people take on a lot of debt, the fact that people struggle to save for retirement There are many things we can change.

So I just want to end this with a call to action, particularly at the employer level, because there is so much that can be done and we have the tool and the ideas and the technology to do it, so let’s do it.

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