The financial impact of the pandemic has hit each worker differently, but many Americans have been left on their own to deal with stress, overcome financial struggles and work through personal challenges.
With more than three out of four Americans living paycheck to paycheck and 40% unable to cover a $400 emergency expense, COVID-19 hit personal finances hard, depleting what little rainy day funds people had. With limited options available, many Americans turned to their employers for guidance and help. Employers that had little financial support to offer — other than a 401(k) loan — quickly realized that their employees needed better options to help make ends meet.
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Employees wanted and needed to save. In the New York Fed’s Survey of Consumer Expectations report conducted this past June, 35% of households used their federal stimulus payment to pay off debt, and 36% saved the payment. In August, a follow-up survey asked what consumers would do if they received a second stimulus payment, and 45% of respondents said they would save it.
Despite the vaccine rollout, remote work remains the norm. Virtual roll-out of benefits can be a big challenge for employers that previously had most employees onsite. Many employers have
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Employees desperately needed to establish a budget and set financial goals to stabilize their finances and prepare them to handle unexpected challenges in the future. In order to properly plan for the future, employees must first assess their current situation. Employees may be surprised at what they uncover when they dig deep into their finances. Some financial situations may be worse than anticipated and that could be very jarring for one’s emotional and mental health. That is why it is important for employers to offer tools and resources that enable employees to assess their financial health. Once they identify areas of opportunity, they can develop a plan to guide them down an appropriate path to financial success.
From March to May 2020, FinFit saw a 20% increase in employees not contributing to their 401k, and an 11% increase in employees that had to stop paying down debt due to financial strain. It is no surprise that these challenging times took a toll on employees.
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However, there was some good news: there was a 14% increase in employees who prioritized setting up an emergency fund as their top goal. The data continues to show positive trends, as of the fourth quarter, 35% of employees have established their top financial goal as setting up an emergency fund. Additionally, 30% of employees now prioritize paying down their credit card debt, and 18% want to set up an investment account.
With so much uncertainty in the world, it is encouraging to see that individuals understand the importance of saving and eliminating debt. But without the appropriate knowledge, resources, and guidance, it is nearly impossible for employees to develop a personalized plan that works for their situation.
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COVID-19’s impact on financial health will be long-term, even as employees return to work. Data from our proprietary assessment showed that during the first peak of the outbreak, 10% of employees felt as though their financial health was in a vulnerable state. Fast-forward to August and September, 13.5% of employees felt that their personal finances were in a more fragile state than they were during the first wave of the pandemic.
Since the start of 2021, 66% of households reported that they could only make it three months if they lost their main source of income and 41% could only make it one month or less.
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Despite this staggering data, these concerns are not something you will hear from your employees. Office protocols prevent many employees from talking about their personal financial situations. Every employee is facing a different, very personal situation. Many employees are not comfortable asking their employers for help for fear of embarrassment or shame. Employees may not speak out, but they need support.
The key to helping your employees achieve ultimate financial success is to offer a holistic suite of financial wellness services that supports the four key pillars of financial wellness: Spend, Save, Borrow and Plan. These four pillars are defined by the Financial Health Network and support holistic financial well-being that is critical to the implementation of proper financial wellness programs that aid employees in all four areas. Offering benefits or single-point solutions that focus only on one of the pillars can add value, but they aren’t effective at driving real behavioral change.
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The last two years continue to give many employees first-hand experience with how mounting debt and lack of savings can impact their lives. This uncomfortable situation is creating a desire and a sense of motivation to improve financial acumen and make the necessary changes to reach a state of greater stability. Now is the time for employers to show support for employees in this endeavor by giving them the tools and resources they need to establish their path to financial success.
