Personal saving takes a back-burner to employees' other financial stressors

More than nine in 10 U.S. employees faced financial stress in their personal lives this year, which reduced contributions to personal savings and employer-sponsored savings plans. Finances are a major source of stress among both employees and employers, according to the inaugural State of the Workplace Financial Benefits Study from Morgan Stanley at Work.

The study found that employees across all generations are struggling with their personal finances amid the pandemic. This has led employers to use financial wellness benefits in to reduce employee financial strain and drive productivity. Among the notable findings from the study:

Employees lost financial footing amid the pandemic. Ninety-one percent of employees report having faced personal financial issues, with the top three being: household budgeting (47%), debt reduction (42%) and emergency and short-term savings (30%). Nearly one in four millennials report having faced a full-blown financial crisis, compared with 17% of Gen X and 8% of boomer employees.

Employee contributions to all financial accounts took a hit. More than half of employees said they needed to reduce contributions to savings, debt or loan payments that occurred across 401(k) savings accounts (29%), long-term savings (28%), emergency and short-term savings (25%) and debt and loan payments (25%).

Employees and HR executives alike see the impact of personal financial stress on work productivity and performance. Sixty-four percent of employees report that financial stress is negatively affecting their work and personal life, while 82% of employers are worried personal financial issues affect employee work productivity. This is particularly higher among millennials, where 70% cite higher financial stress, compared to 61% of Gen X and 49% boomer employees.

HR executives and employees have an idea of where to start. About one-third of HR executives and 21% of employees said student loan repayment management is an essential benefit to helping employees meet their personal financial goals.

“The pandemic has created negative financial consequences for employees across myriad industries, roles and personal situations,” said Brian McDonald, head of Morgan Stanley at Work. “Yet the crisis also produced an opportunity for employers, as employees are increasingly looking to the workplace for assistance with short- and long-term financial needs like budgeting, managing debt, building emergency savings and planning for retirement.

“Given the financial hardships employees have faced over the pandemic, we are not surprised to see financial wellness tools evolve from nice-to-haves to necessities.”