How to Help Your Employees Deal with Financial Stress
Employee financial concerns can have a major impact on your business. Learn what you can do to help ease employee financial stress.
The COVID-19 crisis isn’t just a risk to our physical health—it’s also a risk to our economic health. In fact, a new survey from the National Endowment for Financial Education® (NEFE), revealed that nearly 9 in 10 Americans say that the pandemic is causing stress on their personal finances.
With the unemployment rate hovering around 13%, many people are struggling to pay for housing, food, and other necessities. And even those who have jobs are feeling the squeeze. According to NEFE, the top ten financial stressors are:
- Having enough in emergency savings – 41%
- Job security – 39%
- Income fluctuations – 29%
- Paying utilities – 28%
- Paying rent or mortgage – 28%
- Financial market volatility – 25%
- Paying down/off credit card debt – 23%
- Having enough saved for retirement – 23%
- Paying health care bills – 19%
- Putting off major financial decisions – 17%
Pandemic or no pandemic—many employees are feeling financial stress
Between juggling childcare responsibilities and working from home, it’s no secret that employees are facing added pressure right now. Some may be forced to dramatically reduce their expenses because their spouse or partner has lost their job or had their hours reduced. Others may be caring for a sick relative—or even experiencing medical issues themselves. The pandemic has undoubtedly caused unprecedented levels of financial stress; however, even in the best of times, many employees are in financially precarious positions.
In fact, according to research from Willis Towers Watson—conducted before the pandemic hit the United States—nearly two in five employees live paycheck to paycheck. And it’s not only those at lower income levels who are affected; even highly paid workers with generous employee benefits employees struggle financially. Notably, the survey of employees found that:
- 39% could not come up with $3,000 if an unexpected need arose within the next month
- 18% making more than $100,000 per year live paycheck to paycheck
- 70% are saving less for retirement than they think they should
- 32% have financial problems that negatively affect their lives
- 64% believe their generation is likely to be much worse off in retirement than that of their parents
Employee financial concerns can have a major impact on your business
Wondering what your employees are most concerned about? According to Fidelity Investments’® 2020 New Year Financial Resolutions Study, Americans’ top five financial concerns are:
- Unexpected expenses
- Personal debt (e.g., credit cards, mortgage, student loans)
- Not saving enough for short-term and/or long-term needs (e.g., retirement)
- Rising health care costs
- The economy, stock market volatility, or interest rates
These financial challenges can increase stress levels, hurt job performance, and even damage health. Willis Towers Watson took a deeper dive into the attitudes of struggling employees who live paycheck to paycheck, and found that:
- 39% said money concerns keep them from doing their best at work
- 49% reported suffering from stress, anxiety or depression over the past two years (compared with 16% of employees without any financial worries)
- Only 39% of struggling employees were fully engaged at work
If that’s not bad enough, a report from Salary Finance found that employees with money worries are 8.1 times more likely to have sleepless nights, 5.8 times more likely to not finish daily tasks, 4.3 times more likely to have troubled relationships with work colleagues, and 2.2 times more likely to be looking for a new job.
As you can imagine, these feelings of disengagement, dissatisfaction, and anxiety can wreak havoc on employee wellbeing—and on your bottom line. In fact, Gallup research shows that U.S. businesses are losing a trillion dollars every year due to voluntary turnover. Companies may also experience reduced lost productivity, additional medical insurance expenses, increased absenteeism, and other unanticipated side effects of a workforce that’s financially stressed.
More money isn’t always the answer
It’s easy to read the statistics and think, “well, maybe we should just pay our employees more.” While your employees may appreciate a bonus or a raise—and it may temporarily ease some financial stress—it won’t solve the whole problem. Even highly paid employees experience financial stress because it’s less about the money and more about the money management and financial literacy.
In fact, a Merrill Edge survey of more than 1,000 mass affluent Americans found that:
- 59% believe their financial life impacts their mental health
- 56% believe their financial life impacts their physical health
- 51% are worried about their finances over the next five years
- Excluding their mortgages, 73% are carrying some form of debt
What can you do to help ease employee financial stress?
You don’t need a big, expensive financial wellness program to help your employees. To begin, think about financial wellness benefits resources you already have at your disposal:
- Does your health insurance plan have an Employee Assistance Program (EAP)? In addition to helping employees navigate health care issues, EAPs frequently offer advice on budgeting, debt consolidation, retirement savings planning, and more.
- Do you have an in-house expert? Enlist your CFO or another financially savvy manager, CFO, or HR professional, to share savings tips or lead an information session to address common financial issues. answer commonly asked financial questions.
- Do you offer a 401(k) plan? If so, your 401(k) provider 401(k) provider likely offers a variety of educational tools and resources to help employees budget and save for retirement (and beyond).
By leveraging these resources, you can begin the process of improving employee financial wellbeing.
Betterment can help
At Betterment, our mission is simple: to empower people to do what’s best for their money so they can live better. By using our innovative, online platform, employees can plan for their long- and short-term financial goals ranging from retirement to an emergency fund to a new house. Betterment’s unique technological solution:
- Takes into account employees’ ages, savings, and goals to create a personalized plan to help them save for the future they want
- Enables employees to link their outside assets, making it easy for them to see the full picture of their personal finances
- Can boost employees’ after-tax returns by an average of 0.48% each year, which amounts to approximately an extra 15% over 30 years if they take advantage of our tax coordination strategy
Beyond saving for retirement, Betterment helps employees gain control of their finances so they can reduce their stress and focus on what matters most.
All About Vesting of Employer Contributions
Employers have flexibility in defining their plan’s vesting schedule, which can be an important employee retention tool.
401(k) Plan Fiduciary: How You Can Mitigate Your Risk
Fiduciary responsibilities can seem daunting and time-consuming. Learn the ins and outs of your responsibilities and which ones you can delegate.
401(k) Glossary of Terms
Whether you're offering a 401(k) for the first time or need a refresh on important terms, these definitions can help you make sense of industry jargon.