Creating an employee financial wellness program during a pandemic
Here are 5 essential services employers could offer that would help employees manage financial stress.
Financial stress is wreaking havoc on your employees’ happiness and productivity. Even prior to COVID-19, many workers spent hours every week worrying about personal finance concerns like debt, retirement readiness, and even hitting long-term goals like saving for college. Those stressors not only impacted individuals, American businesses also lost $500 billion annually as a result. According to a March 2020 Betterment for Business report, 77% of millennials and Gen Z savers say that thinking about their finances causes them stress.
The economic impact of the ongoing global pandemic has likely only increased your employees’ financial anxiety, with factors such as reduced salaries and spousal unemployment weighing on them. A recent survey by Edelman Financial Engines found 46% of workers are “extremely” or “moderately” concerned about their household income in the COVID era, with their top concerns including retirement savings, job security, and health care costs. It’s more important than ever for employers to prioritize the financial health of their employees.
An increasing number of forward-thinking employers have begun to offer holistic, comprehensive financial wellness programs that help them increase employee happiness and productivity, and retain top talent. According to the 2019 Workplace Benefits report, 53% of companies now offer financial wellness programs, compared to 24% in 2015. This growth is encouraging, but still leaves nearly half of American workers without one. While financial wellness programs may feel like a secondary concern to primary benefits like health care and retirement savings plans, their importance has only grown in the current landscape.
How do you build a financial wellness program?
Most employers know that 401(k) benefits are an important first step toward helping their employees build a better future. A good 401(k) plan is the bedrock of every wellness program, but it’s just one of several financial support programs that employers should offer in order to fully support their employees’ economic well-being. Here are five essential services that you should offer your team in order to help them manage financial stress during the pandemic and beyond:
1. Employee assistance programs. Employee assistance programs (EAPs) provide confidential counseling services for a range of personal and professional concerns. They can also be used to support employees struggling with mental health challenges like anxiety and depression which have become especially prevalent during the pandemic, according to new data from the CDC. Unfortunately, as more and more Americans begin to struggle with their mental health, the costs of related care are continuing to skyrocket. By offering an EAP, you’ll encourage your employees to seek treatment that will help them – this is all the more important in the midst of the COVID-19 pandemic.
2. Financial planning courses. Financial planning courses can help your employees to feel more in control of their spending and saving amidst the looming financial uncertainty of the pandemic. I consider these courses to be an incredibly important component of any holistic financial wellness program: after all, how can employees secure their financial futures if they lack skills like budgeting, retirement planning, and utilizing HSAs? Employers should offer quarterly free financial planning courses and encourage their full teams to join, with a special focus on encouraging participation from younger employees, who bear the brunt of pandemic-related money management anxiety. It’s a good idea to have a licensed CFP lead these sessions to ensure that your employees receive professional advice from someone who specializes in compassionate and empathetic financial advice.
3. Debt management courses. Debt management courses aren’t always included in financial wellness packages, but they should be: Your employees may be quietly drowning in debt. The average American has $4,400 in credit card debt and the average interest rate on those cards is around 15%. The graduating class of 2015 averaged $35,000 in student loan debt, more than any class in history, and now this class and their peers make up the backbone of entry-level employees in corporate America. High-interest debt is an emotional burden and drag on your employees’ finances, which is why eliminating it from their balance sheets should be one of the top priorities in your assistance program.
4. Emergency funds. Work-sponsored emergency funds aren’t yet as common as they should be, but I strongly recommend offering one to your employees. Now more than ever, it’s essential to save regularly towards some kind of safety net based on your monthly expenses. As an employer, you can offer an Employee Savings Plan, a pooled investment account that allows your employees to set aside a portion of their pre-tax wages as emergency savings. At Betterment, we call this a Safety Net, and our allocation advice is conservative (15% stocks, 85% bonds). Some employers even have emergency fund matching programs, a concept very similar to 401(k) matching. I predict that work-sponsored emergency funds will grow even more common after the pandemic: 41% of Americans planned to put their CARES Act stimulus check into an emergency fund, which tells me that COVID-19 is helping many Americans to take planning for worst-case scenarios more seriously.
5. One-on-one advice. One-on-one advice sessions with CFPs have traditionally been accessible only to those willing to pay large out-of-pocket costs for their services; however, employers are increasingly providing these sessions as a free or reduced-cost employee perk. Work-sponsored CFP advice sessions might be ubiquitous one day, so why not get ahead of the curve and start offering one now? Competitive benefits like these can be helpful in attracting and retaining talent, and your current employees will thank you.
How do you know if your financial wellness program is working?
So you’ve created a holistic, comprehensive wellness program that fully addresses your employees’ financial, psychological, and educational needs when it comes to personal finance. How can you tell if it’s working?
I suggest tracking the three KPIs below to determine if your financial wellness program is succeeding or still requires fine-tuning:
1. Literacy surveys. Employee financial literacy surveys are an excellent measure of your program’s success. After your employees attend a debt management or financial planning course, ask them to fill out a brief 5- or 10-question survey to gauge their knowledge retention. You can compare individual employees’ results year-over-year to see if your employees are learning what they need to know in order to manage their finances.
2. Stress management assessments. Employee stress management assessments, if administered anonymously, can help you take the pulse of your team’s financial stress. I recommend a quarterly or biannual money stress survey to see if your wellness program is moving the needle on financial well-being at your company.
3. Retirement readiness checks. Retirement readiness checks typically include checking in on the state of your employees’ work-sponsored retirement plans. As an employer, you can track meaningful KPIs like plan participation rates and the size and frequency of your employees’ contributions. This can help you measure your program’s success in managing not only current financial concerns, but also securing your employees’ financial futures. You might also consider sharing retirement readiness newsletters on a regular basis (whether that’s monthly, quarterly or biannually) that share useful retirement information and savings tips, reminders to increase their retirement plan contributions, and encouragement to discuss retirement planning with their significant other or family.
I hope that the COVID-19 pandemic will mark a turning point for employee benefits. I hope that employers will emerge from the crisis with an understanding that their employees’ physical, emotional, and financial wellness are inextricably linked. I hope to see an influx of employers going above and beyond just offering a 401(k) and starting to offer comprehensive financial wellness programs that serve the full range of their employees’ needs. If the pandemic has taught us anything, it’s that we can’t afford to return to business as usual.
