The Great Recession and the stock market collapse in 2008 set many employees back financially. Six years later, many still continue to work their way out of this challenging period. Financial stress has been heightened and a recent survey by the Society for Human Resource Management found that 7 out of 10 employees indicate that personal financial issues have an impact on their performance at work.
Employees in a difficult financial situation are more likely to dip into savings, even withdrawing from retirement plans if they feel they have no other alternative. For some employees, meeting current budget needs, managing debt and saving for retirement at the same time may seem like a herculean task. Financial stress can take both a physical and mental toll.
According to a recent survey by Harris Interactive:*
- 28% of those surveyed had trouble meeting monthly household expenses
- 44% say they don’t have at least $2,000 in emergency savings for unexpected expenses
- Employees top cash flow concerns include anxiety about insufficient emergency savings for unexpected expenses (49%), delayed retirement (45%), not being able to meet monthly expenses (22%)
A recent survey by Bankrate.com revealed that 23% of Americans reported having more credit card debt than emergency savings, while the U.S. Department of Commerce recorded that the U.S. personal savings rate fell to 4.2% as of November 2013, well below its recent five year high of 8.7% in December, 2012.**
Fostering Financial Health
Financial wellness enables individuals to effectively manage their financial situation – from household budgeting, managing debt, saving for both short- and long-term goals, and being able to handle any unexpected financial situations that may occur. Studies have shown that employees who are financially sound and without significant money worries at home, are typically happier and more focused at work.
While many companies have instituted physical wellness programs for their employees, financial wellness initiatives are also worth considering. Financial education provided for employees, some who may not even know where to start, can relieve unwanted stress and potentially enhance employee focus and productivity.
With this in mind, many companies have started by providing access to information about the importance of budgeting, debt management and savings. Some companies have even incorporated comprehensive financial wellness programs into their overall benefits package. These companies are experiencing positive results with a more engaged and focused work force. As might be expected, financial wellness has led to increased contributions to retirement plans.
Higher Plan Participation
Empowering employees with personal financial education can have a positive impact over time on an employee’s ability to participate in a retirement plan. As an employee is more able to manage and meet their immediate expenses, reduce debt and build emergency savings, they are able to increase their contributions to a company-sponsored retirement plan or start participating for the first time.
Providing employees with the tools and education they need to take control of their finances can be a win-win for the employee and the employer. With this in mind, Alliance Benefit Group continues to develop resources that can help plan sponsors provide their employees with access to financial wellness tools. A new exciting resource will be launched soon and we will update you on our progress as we move forward.
*Source: Harris Interactive and Purchasing Power Survey, June 20-24, 2013.
**Source: The Federal Reserve
