When it comes to financial benefits at work, employers usually offer a 401(k) retirement plan option — and that’s it.
But economists and human resources experts suggest that expanding financial benefits for workplace wellness could be a cost-effective way to quickly address the staggering number of Americans living paycheck to paycheck. the other, struggling with credit card and student loan debt, and experiencing stress. their personal finances.
The following Q&A with top industry experts explore how we define financial wellness after the coronavirus pandemic and the different types of financial wellness programs available today.
Q: How do you define financial wellness?
Annamaria Lusardi, Academic Director of the Global Financial Literacy Excellence Center at the George Washington University School of Business: As the word goes, it means having a 360 degree view of people’s personal finances.
We looked at some indicators of what financial well-being is and what is possible to achieve, and I want to mention five of them, which are a kind of financial review that we can do for our employees and people in general.
First, do people have the financial skills and knowledge to navigate the financial decisions we all need to make? Second, do we have the capacity to deal with unexpected shocks that might otherwise derail our path? Third, are we debt-constrained or can we manage and meet the debt obligation? Fourth, can we plan and save for the future? Finally, can we take advantage of all the advantages offered by employers to do better in our personal finances?
This means looking at people’s personal finances well beyond their retirement savings. By analogy, I mean it’s like the check we do every year when we go to the doctor or what we do for our car, for example, when we take it to the mechanic. We want to do prevention. We want to make sure that we live really well and that we are satisfied that we can manage our personal finances well.
This is important because if you are a young person, you start your economic life today in debt, probably with student loans. We all face increased risk: it could be climate change risk, it could just be macroeconomic shock risk, as we have experienced with the pandemic and war, and it can It’s also about being much more in charge of our short- and long-term financial security.
Q: How has the coronavirus pandemic further exacerbated existing issues around financial literacy and the need for financial wellness support?
Alexander Alonso, director of knowledge at the Society for Human Resource Management: We’ve had a macro shock like we haven’t seen, frankly, since World War II, and one of the things we’re seeing from a financial perspective is that organizations are actually decreasing the number learning benefits they offer, overall. In fact, we know that only 45% of companies offer it, and when they offer it, usage increases by almost 20%.
We’ve seen a sort of shift in the organization’s priorities, and it’s no surprise that this has happened. When we talk specifically about the pandemic, more often than not, CEOs, (Chiefs of Experience), and (Chiefs of Human Resources) all point to one thing that struck them as an immediate need that arose due to the pandemic: it was real well-being and sanity. The problem is that it has diverted energy and attention away from core financial literacy skills.
Keep two other stats in mind: Only 60% of working Americans said they could survive a macro shock for more than four months, and only 7% said they felt they had the financial knowledge to survive. and keep their finances. and their ongoing financial planning. It is an indication from American workers that they themselves do not feel ready for what we have been through. We saw a completely different perspective, both from the worker and from the workplace.
Q: Many employers are looking to resolve some of these issues. What do these programs actually look like once implemented?
Diana Witkowski-Grubard, Director of Human Resources at Northwell Health: In 2014, we had one of those typical surveys where you answered a bunch of questions and in the end nothing happened. We left you dry. There was no follow-up. We’ve really started to focus more on promoting our pension specialist. We started encouraging our employees to start planning for their retirement and meet with a plan specialist.
But then, in 2018, we began to evolve our program looking to create a user experience that would take our employees through a journey. We are not just doctors and executives. We want to address this population, but also how do we start meeting the needs of those who traditionally fall outside of this financial reach and how do we start educating them?
Our financial wellness program really looks at three main components. We have a digital education experience, designed to measure and improve financial well-being by exploring a range of topics based on your individual needs. So you fill out a survey and based on your responses, you’re going to go on a trip and that information is going to be provided to you in a number of different ways.
We also try to offer workshops on hot topics like cybersecurity and cryptocurrency – not your typical financial education topics.
The final element for us is our financial planning. We allow our employees to sit down with a designated financial planner to discuss their individual needs. And it was a huge success. We really want a program that meets the needs of all our employees, where there is something for everyone and that is really easy to access.
Q: Thinking of employees of all salary and different backgrounds, is there a group or groups that are most in need of financial wellness benefits?
Dani Pascarella, Founder and CEO of OneEleven Financial Wellness: In America, the bar is just abysmal low. There’s nowhere to really learn this stuff, and we really struggle to develop these healthy habits.
Four out of five Americans are paid check to check, even if you look at millennials earning six figures. High incomes and young people are still 60%. So these bad habits, not learning the right way of doing things from an early age, affect all income levels.
And if you look specifically at 401(k)s, for example, which is the most common benefit you’ll see, among white families, 65% contribute to it. When you look at black families, that drops to 44%. Among Hispanic families, it’s 28 percent. And then, when you look at gender, men have three times more retirement savings than women. So demographically it’s a huge diversity and inclusion issue if you just offer a 401(k) and don’t offer anything that helps people who would like to contribute to retirement but who can’t afford it yet because maybe they’ve faced a pay gap all my life.
Q: Looking ahead, what do you predict for the future of financial wellness?
Lusardi: I think this is a unique opportunity to use the time we are in now to use what we have witnessed – for example, during the pandemic and how important it is to be prepared for the unexpected – to really reinvent the future. We cannot go back to what existed before the pandemic, because it was not enough.
We need help. It is more difficult to find reliable resources and resources, and that is why the employer can be an incredible source of help and information. This is often what the employee wants. This can be very profitable, especially if you have a very large workforce.
Look at how vulnerable people are to shock: how low financial literacy is, the fact that we have nothing in school, for example, the fact that people are in a lot of debt, the fact that people struggle to save for retirement. There are many things we can change.
So I just want to end with a call to action, especially at the employer level, because there is a lot to do and we have the instrument, the ideas and the technology to do it, so let’s do it.