By: Sarah Kyo
Businesses across the U.S. are re-opening, but it’s unclear when we’ll return to some semblance of normalcy: a possible second wave of COVID-19 cases is a risk we may need to face. There are so many factors outside of our hands, but one thing we can control is our personal budget. While weathering these challenging times, saving money and cutting back on unnecessary spending are just a couple ways that we can prepare in case of an emergency.
As an employer, helping your employees take care of their financial health should be prioritized as much as their physical, mental, and emotional health. According to a recent MetLife survey, right now, employees are most concerned with their personal finances compared with any other aspect of their well-being. During this period of economic uncertainty and volatility, employers have had to make tough, cost-saving decisions that have strongly affected their team:
- 29% of full-time U.S. employees now earn less due to the financial impact of COVID-19 on businesses.
- The employment status of 38% of employees has been directly impacted by the pandemic, while an additional 36% expect to be impacted in the future.
- As of April 2020, 47% believe their employers have a responsibility to address their financial well-being – this is an increase from a year ago at 40%.
Developing healthy financial habits now can set up employees for the future. Otherwise, employees’ stress over their financial concerns can spiral into survival-mode panic and anxiety. If these feelings aren’t dealt with properly, they can lead to long-term consequences that negatively influence employees’ overall health, productivity, and interactions with others. You can alleviate some immediate concerns for your team while addressing their long-term financial situations with access to benefits, programs, and resources.
What is Financial Wellness?
According to Investopedia, financial health is the state and stability of your personal finances and financial affairs. How you feel toward your financial health reflects your financial wellness, says personal finance expert John F. Wasik. “Financial wellness, put simply, is the ability to have a healthy financial life,” he wrote in a Forbes article. “It means your debts are payable and you have ample emergency, college and retirement funds. You’re well prepared to handle any financial crisis.”
A major obstacle to that sense of security is a lack of preparation and financial literacy, or the knowledge and skills to make sound financial decisions. For example, only 41% of Americans can afford to pay for a $1,000 emergency from their savings. Even with guidance from a professional, financial advisors said 51% of their clients had little-to-no savings for their health expenses, and 40% aren’t putting any of their income toward savings or investments. While you should leave individual finance and tax advice to professonial advisors, your organization can still help your workforce focus on financial planning.
How to Support Employees’ Financial Wellness
These tips can be a starting point for your HR team to consider before consulting with your benefits administrator and plan providers, who are more familiar with your organization’s needs:
1. Offer Tax-Advantaged Accounts
Whether it’s a daily prescription or a sudden trip to the emergency room, health care costs can really add up for your employees and their dependents. If your benefits include a health savings account or flexible spending account, encourage your employees to enroll in the account that aligns with their medical plan during open enrollment. By setting aside pre-tax funds in advance, the employees will have additional money saved for out-of-pocket expenses. A health savings account in particular offers additional tax advantages such as tax-free interest, savings, and withdrawals.
2. Help Employees Save For Retirement
Retirement may feel like decades from now for some employees, but even investing a small portion of each paycheck can make a difference over time. Picking the right funds can seem initimidating, but some retirement plans auto-enroll employees at a low percentage with a diverse mix of assets determined by your plan provider. It’s important to clearly communicate with your employees, though, that they have the option to adjust the contributions or stop them at anytime. Also, encourage them to speak with your plan administrator and their personal finance advisor to make the right decisions for their own situation.
Another tactic that some organizations offer is a matching 401(k) contribution in order to inspire employees to invest some of their paycheck. This is an attractive perk if it’s within your budget. Plus, offering access to both Roth and traditional contributions with their deferred or pre-tax situations, respectively, can provide more options for your employees to pick the tax situation that makes the most sense for them.
3. Provide Educational Resources
Bringing in financial experts from your plan providers and benefits administrator is a great opportunity for your employees to ask questions and learn more about how to save money and use it wisely. If you host a webinar, make sure to record the meeting and offer access to the video, slides, worksheets, websites, and other related resources afterwards.
Additionally, a digital financial education communication experience allows employees to review financial content at their own pace, on their own time. For example, GuideSpark Communicate Journeys™ give you access to animated videos, infographics, messaging, and more to educate your team while promoting greater awareness of your organization’s total rewards. A related communication campaign encourages employees to explore topics such as budgeting, debt, and Social Security while viewing the content that’s most relevant to them.
During a time of uncertainty like the COVID-19 pandemic, you should do what you can to alleviate your employees’ worries. That way they can more easily focus on their work and perform at their best. By investing time and effort into your employees’ financial literacy, you can better prepare your team for whatever comes next.
