The recent government shutdown sliced through the seemingly healthy skin of the economy to reveal the fragile state of American workers’ savings.
The problem? Over 80 percent of American employees say they are living paycheck to paycheck. Many say, they couldn’t afford to pay an extra $400 in a financial emergency.
A worrying trend
With no financial safety net, many tap into retirement or their kids’ college funds to weather the storm. According to recent 2018 report, 42 percent of employees say it’s likely they’ll need to use money held in retirement funds for expenses other than retirement. That number gets even higher for employees who are stressed about their finances and impacted by student loans. Retirement funds have become the only safety net for the American worker. And some don’t even have that. Thirty five percent of private sector workers over the age of 22 don’t work for a company that offers a plan. What do they have to fall back on?
The thing is, retirement or college fund accounts are not supposed to be used in this way, and employees and employers are suffering the consequences. Stress about money and the inability to save is costing real dollars in decreased performance, increased absenteeism, lost productivity, and higher overall health costs.
Employees want to save, but they need help from their employer
In a recent AARP study, 71 percent of employees said they would participate in a payroll-deduction savings program if their employer offered one. The reason they want to save? To reduce stress, save more, and build a rainy-day fund outside of retirement. Plus, participation would increase by 87 percent if employers matched payroll contributions.
Workers say they want to save. So, why aren’t they?
We all want to exercise more, cook healthier meals, and do better with our finances. What stops us? Life. Our kids are sick, our aging parents need our help. Life gets in the way, so we must make it easy for employees to save automatically and access their funds whenever they need it.
Why Employers should support financial well-being.
Providing an option to save improves employee satisfaction, reduces stress, and can increase production and retention rates. Some studies suggest that wellness programs may have an ROI of $1.50 for every dollar spent. But, only one in five employers currently offer a financial wellness program. The want is there, the need is there, so what’s the issue?
This answer is complicated as the term “financial well-being” changes depending on whom you ask. This leaves employers with the tricky task of developing something that may not appeal to their workforce, or it may not be in an accessible format employees can easily use, interact with, and trust. Employers don’t know how to support non-retirement savings accounts.
We are at a cross roads. There is a need, and no solution to fill it. What can be done to help these employees that will produce real outcomes? One size doesn’t fit all when it comes to benefits. Employers must start gathering data on their own populations to understand what kind of solution would be helpful. Employees are willing to start saving but employers need to make it easy and automatic for successful results.
Find out more about the impact of financial wellness below.