Although unemployment rates are at a 16-year low in the United States, many workers still feel stressed about their personal finances — over 60% of Americans wouldn’t be able to cover a $500 emergency.
This problem is only compounded by a lack of financial education among the workforce. As employees remain stressed about their personal finances, the effects ripple into their jobs as well. But what is the true cost of financial stress?
Understanding the numbers
For starters, 50% of Americans don’t have a monthly budget that helps them stay on track. Even more staggering, over 75% of workers are living paycheck to paycheck. It’s easy to see why financial stress is so prevalent and why it continues to manifest outside of monthly bill paying.
According to the 2017 PwC survey of employee financial wellness, a third of employees have reported being distracted at work by their personal financial issues. And looking at data from Human Resources Magazine, about 20 hours a month of productive time is lost when employees spend time at work thinking about their finances. It’s estimated that all of these distractions cost the American economy $300 billion annually in lost productivity and unnecessary expenses dealing with the stress and health issues associated with poor financial situations.
A study by the Synergy Financial Group provides an even more concrete example: The Bureau of Labor Statistics estimates that the average employer pays about $34/hour for total employee compensation and benefits. The total lost productivity of an employee worried about their personal finances is about 156 hours per year. That means that a business with just 100 employees could be losing as much as half a million dollars annually just in lost productive hours from employees worried about their finances at work.
How costs manifest
- Retirement planning: If the source of financial stress is not earning enough money, employees are less likely to contribute to their employer-sponsored 401k programs. With fewer people contributing, costs for other employees start to rise, leading to higher premiums and costs absorbed by employers.
- Absenteeism: As employees struggle to pay their bills or save for the future, absenteeism rates rise. Lost productivity because of health issues or stress related
Financial Wellness Benefits
Despite the prevalence of financial stress, financial education resources are still unavailable to most employees. Luckily, that trend is changing. In 2016, the most popular benefit request for employers was financial wellness education.
Businesses that implement financial literacy programs see measurable impacts on productivity, decreased absenteeism, and lower turnover rates. At the University of Louisville, every $1 they spent on financial wellness benefits lead to a $7 return.
Choosing the right solution
To get the most benefit out of a financial wellness benefit, you have to choose the one that’s right for your organization. For organizations with lower-wage employees, financial wellness tools should focus more on education and short-term gains, rather than investments in 401(k) programs or retirement plans.
Organizations with many entry-level positions tend to have employees with more immediate financial needs that should be addressed before addressing long-term needs like retirement and reduced health care costs.
For companies with higher-paid workers, investment into retirement plans, educational tools, and integrations that are easy to access are key.
In general, financial wellness solutions work best as online platforms, not traditional in-person classes. Plans that focus on accessibility and flexibility to work into existing schedules see higher engagement rates than fixed-schedule courses.
Education and Integration
When looking for a tool that’s right for your organization, depending on your needs, try to find tools that not only offer educational components to assist employees in their financial stresses, but also integrate with employees’ existing financial benefits.
If your company offers a 401(k) or other health and retirement benefits, some financial wellness tools can integrate with your existing benefits offerings to make saving and planning easier.
All-in-one benefits portals are easier for employees to manage because they don’t have to keep track of multiple accounts or plan documents.
Evaluating the Financial Benefit
After you rollout a financial wellness benefit, you should use both traditional ROIs and VOIs (value on investments) that give you a full picture of how a financial wellness program is benefiting your business.
Monitor absenteeism, use self-assessments, and track business growth both short and long-term and compare it to the rollout of the financial wellness programs. Self-assessments that look at stress levels among employees will help you see if a financial wellness benefit is having a positive impact on your business.
If you offer financial wellness benefits at your organization, we’d love to hear your story!