Recent employer surveys show that employee financial well-being can impact your bottom line now more than ever. As employees take on more debt, they take on more stress — and they are more likely to suffer health problems, according to a poll by The Associated Press. For example:
29% of people with high levels of stress from debt say they have suffered from severe anxiety versus 4% with low levels of stress from debt.
33% of people with high levels of stress from debt say they have suffered from high blood pressure or hypertension versus 26% with low levels of stress from debt.
Given the impact financial stress can have on employees and their bottom line, many companies are now establishing financial wellness programs. In a report titled “Is 2017 the Year of Employee Financial Wellness Programs?” the Society for Human Resource Management (SHRM) reported that 49% of employers are offering some type of financial advice or resources to their employees, including resource materials or referrals, online assessment and advice tools. Some are also providing group training and one-on-one sessions with a financial counselor.
The good news is employees want help. A recent study by MetLife reported that 62% of employees are looking to their employers for more help in achieving financial security through employee benefits. A successful financial wellness program may not only help boost productivity, but also help recruit and retain top talent.
It’s well publicized that Generation X (born between 1965 and 1980) faces a lot of debt, and members of this generation are perhaps most likely to be engaged in a financial wellness program.
Gen X has an average debt of $125,000, according to a recent report from Experian. This includes mortgages, credit cards, auto loans, student loans and personal loans. That total far exceeds the national average consumer debt of $88,313 per adult.
Millennials (late 1980s-mid 1990s), who tend to be more reluctant to take on debt, owe $52,120 on average.
Baby Boomers (born 1946-1964) owe an average of $87,438.
Generation Z (mid-1990s-early 2000s) doesn’t have a comprehensive economic profile yet, but so far this generation has proven receptive to financial education. According to a study by the Center for Generational Kinetics, Gen Z puts a high priority on saving money, with 21% saying they've had a savings account since before age 10. They tend to be more optimistic about their financial future than any other generation.
You have probably heard that many companies are now establishing financial wellness programs, but like many, you might not know what it really encompasses. Historically, employers’ role in the finances of their employees has been through their retirement plan benefits and maybe with an underutilized employee assistance program. This approach has not been effective, especially for individuals looking at a mountain of debt. Retirement is not even a consideration given their current circumstances.
Similar to making changes to one’s physical and emotional well-being, taking action on addressing your financial situations can be just as daunting. Medical professionals and employers have found that education alone on health issues and disease does not create behavior change. Moreover, as we say in health coaching, "shoulds" don’t result in behavior change. Most people know they "should" exercise more or eat healthier, but that does not result in us actually doing it. The same is true for financial wellness — most people know they "should" pay off credit card debt and save for retirement, but that can be easier said than done.
As with health related wellness, there is no "one size fits all" approach to financial wellness. Employees are at different places on the financial wellness spectrum and have varying preferences for accessing services they may need. A successful financial wellness program will include both educational information as well as resources. The educational component should cover the various aspects of an employee’s financial life, such as debt management, college education funding, mortgages, credit management, retirement planning and budgeting — just to name a few. Available tools and resources should encourage people to take some sort of action. They may include a financial wellness assessment (similar of a health risk assessment) which outlines the bigger picture of an individual’s financial situation, and access to financial consultants or financial planners to identify and guide employees through the first steps in the process.
A recent headline in Forbes stated that 30% of millennials would “sell an organ” if it would relieve them of some of their student loan debt. Employees' personal financial issues are impacting how they function at work, and they are impacting your bottom line.
The amount business owners and executives can contribute toward their own retirement savings is limited — at least relative to their high contribution potential. This article will discuss the concept of combining a safe-harbor 401(k) plan with a cross-tested profit sharing plan in hopes of providing an alternative contribution and earnings platform.
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