Thinking outside the 401(k): 3 ways to deliver financial wellness workers need

Is financial wellness training important for your employees/?  78% say yes, according to survey data from talentlms.com. Digging deeper, 39% of surveyed employees say is it very important and another 39% agree it is somewhat important. Do employees view their employer as a trustworthy provider?  The answer is an overwhelming yes at 80%. Now for the bad news. Employers need to go beyond the obvious.

Related: Infographic: Workplace top priority is financial wellness

According to Google, 73% of Smartphone owners use an app to help manage their finances. You have seen the TV ad when the guy says: “I don’t need an app to tell me I spent too much on dinner – I just signed the check!” The message is people need practical information they can use.

Let us assume financial wellness can be divided into three areas. Saving more, spending less and “other.”  Let us look at each area in detail.

Saving more

This is where “max out your 401(k)” is the advice people hear over and over. This is hard when they are having difficulty making ends meet and their paycheck barely covers their expenses. In addition to advising they participate in their 401(k), here are three other ways they can save when money is tight. This is a good focus for part of your financial wellness training. It also highlights your firm’s benefits on offer.

1. Company stock purchase 49% of S&P 500 companies offer a stock purchase plan for employees. Employees can buy shares at a discount, often up to 15%. The employee usually takes possession of the shares fairly quickly, perhaps on a quarterly basis. They can sell when they choose. Although stock market volatility is an issue, this might represent a 15% return over a three-month period, less taxes and transaction costs. They have saved over the short term. If they need the money, they can access it. If they don’t, they have savings.
2. Tax refunds. According to CBS, about 75% of Americans get tax refunds from the IRS. This should be considered a form of savings. You paid more taxes than you owed. Uncle Sam collected your payments, determined what was extra and sent it back to you. FYI: The average refund might be about $2,910. This might be considered a windfall. According to CNBC, approximately 33% of Americans are putting the cash into savings. You should join them.
3. Annual bonuses. 33% of companies pay year end bonuses, according to Zipla. This can include year-end, holiday and profit sharing. This is another windfall that can be redirected to savings.

Spending less

The problem faced by employees is often not a resistance to saving, but rising expenses leaving them with no discretionary funds.

1. Mortgage debt. Interest rates have risen. If your employees have variable rate mortgages or Home Equity Lines of Credit (HELOC) they are feeling the pain. They would benefit from an educational program on how mortgages work and how to manage the situation in a rising interest rate environment. According to CreditKarma, between April 2021 and April 2022, house prices rose 18.8%. Your employees may be in a position to refinance their home with a fixed rate mortgage and roll in the debt on their variable rate home equity loan. Although no one knows what interest rates will do moving forward, this gives them a fixed number to pay every month that gradually reduces the loan over time.
2. Credit card debt. Can you believe the interest rate revolving charge card balances is almost 25%! Credit card companies want new customers, so they often put out tempting offers for balance transfers. There is often a catch, as the losing institution hits you with a charge. This is another good area for financial wellness training. If your employees have extra cash, paying down credit cards is a good idea. Although a third of Americans redirect their tax refund checks into savings, 44% use them, for debt reduction. If they can’t pay off credit card debt, can they learn how to shop for a better rate/?
3. General overhead. Ask any consumer about grocery prices and they will tell you, item by item, how groceries have gone up in price. They might not be as aware how much their home insurance costs have risen. The number is forecast to be 9%. Car insurance is expected to be up 4% on average. Cable TV bills are up 52% over the past three years. According to Moneylion, cellphone bills averaged $71 in 2012, today they are about $127. These providers all have competitors who would appreciate your business. Teach your employees to make a list of their overhead expenses and shop around. Explain that is what your company does, when they put contracts with service providers up for bid at the end of the contract period.

Other ways to combat financial stress

Financial wellness can help combat financial stress. Exercise can help reduce stress too. Eating a balanced diet helps. Your firm likely has nutritional counseling. They might have an onsite gym or offer a discounted rate at the local gym. This can be another way employees can get relief when life gets overwhelming. If you offer these benefits, tell your employees about them.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” is available on Amazon.