Let’s be honest, no matter how the experts call the nation’s current economic volatility, U.S. employees are still feeling the painful pinch of rising costs for major daily living expenses like food, gas and housing. And for some of them trying to make ends meet, financial insecurity has become a reality.
As these financial concerns increase, they can have a significant impact on employees’ work performance, personal life, and future plans. And almost all employees (93%) look to their employer for financial wellness support. The question then becomes: what inventive benefits – from education and financial resources to loan repayment assistance and financial counseling – can you offer customers to help employees meet these challenges and, more importantly, regain their financial footing?
In figures: the impact of inflation on employees
Let’s start by taking a closer look at some of the causes of these money problems – and the effect it has on employees. Unsurprisingly, Americans say their main concern is paying for housing and current expenses:
- House prices are still up nearly 11% from a year ago, and rising interest rates are having a brutal effect on the housing market. This drives up the cost of buying a home by several hundred dollars each month and crushes demand.
- In addition, rental prices for single-family homes ballooned in the first half of 2022, reaching a national average of $2,495 per month — a 13.4% increase over the same period in 2021.
- Whereas Fuel prices have recently fallen almost 20% from a high US national average of $5.08 per gallon in June, the current average ($4.08/gal) is almost double what it was in 2020.
- Food prices jumped 13.1% in July, the biggest year-on-year increase since March 1979.
As debt continues to mount, so do financial shocks, which Pew defines as a significant loss of income or a major unforeseen expense, such as a trip to the hospital or a major car repair. In fact, 60% of Americans experience financial shocks and one-third experience two or more per year. That puts more financial strain on American families, nearly 70% of whom don’t have emergency savings. These costs are typically around $2,000, which is half a month’s worth of income for the median household.
The impact on employees is obvious. A new survey from financial services provider SoFi has found that just over half of employees are more stressed about their finances today than they were at the height of the pandemic and spend around 25% of their working week dealing with financial problems. The irony behind this brewing concern? While the majority of employees feel financial pressure, only 13% of the workforce says they can talk openly about money at work and get the help they need.
Cynthia Campbell, Director of Experience at BALANCE, an organization that provides comprehensive financial counseling and education services, is one person who has helped employees fight this double-edged sword.
Campbell explains how this prolonged surge of inflation tripped people up. “We saw consumers using credit as a ‘safety net’ during the pandemic when job losses were high. Now, even though we are reporting low unemployment, the average family is still struggling as inflationary prices for gasoline, groceries, clothing, etc., weigh on household budgets. People are turning to credit again, but now interest rates have gone up, making that credit more expensive. The monthly minimum payment increases as the balance increases, but the budget has no room for it. »
According to an August 30 report from the Federal Reserve Bank of New York, the average credit card debt held by households in the United States jumped 13% in the second quarter, the largest increase in such debt since 1999.
Campbell says that for many, the main challenge is often admitting they need help. “It’s hard for some to reach out and ask for advice. But when people shine a light on these financial issues and share the burden of this stress with another person, there seems to be a relief that washes over them.
Financial advisors can then work with employees to co-create a plan to address the specific financial issues they face, from paying off debt and student loans to restoring their credit score and preparing for a future. financially more stable.
“Employers underestimate the impact of financial stress on their employees. If an employee is stressed about their financial situation, they will not be fully present at work. They may also think they need a better paying job,” she adds.
Campbell suggests that it is in employers’ best interests to care about the financial well-being of their staff, just as they do about their physical and mental well-being. “Today’s job seeker is looking for an employer who cares about their ‘whole person’ and allows them to bring their true selves to the workplace.”
On the front line of financial stress
For several years, I worked with Jeff LeMay, ARAG’s Director of Customer Service and Claims. He oversees a team of customer service specialists who are on the front line, so to speak, of responding to member concerns and requests for legal assistance – many of which actually start with financial issues.
LeMay notes, “Members with questions about filing for bankruptcy are quite common. Often they don’t know if filing for bankruptcy is the right option; but they are anxious because they are drowning in debt and don’t know what else to do.
“We also hear from employees who are having difficulty repaying their student loans. We expect this to be an even bigger issue in 2023, as federal student loan forbearance — essentially a pause in payments — is set to end on December 31.
Other catalysts for financial insecurity include housing problems and unforeseen health care costs. “The members want legal help because the landlords are increasing their monthly rent and the member can no longer afford the new rate,” LeMay said. “Some members are also dealing with unexpected medical bills that they cannot pay, which can eventually lead to debt collection.”
Employees considering major steps, such as debt consolidation or bankruptcy options, need a reputable financial and legal advisor to:
- Understand what each option entails
- Know their short-term and long-term implications, and,
- Find budgeting strategies to keep moving towards financial health
“A lot of Americans are in a world of unknowns and there’s a lot of anxiety,” adds LeMay. “But once they have a resource to turn to – and they’re on the right track to help solve their problems – it’s a big relief because it takes the burden off them, financially and emotionally.”
Find out what’s hidden in the current benefits offers
Part of the solution to helping employees improve their financial well-being may be right in front of you. Start by reviewing your clients’ existing human resources and benefits programs that can be leveraged as part of your financial wellness program. For example, your organization’s financial, banking, or life insurance partners may have tools, programs, or websites designed for your employees that you may not be fully promoting. This could include opportunities for financial education through a retirement plan.
But think outside the box
Consider what benefits could complement your existing programs and help employees move up the financial wellness ladder. This could include offering benefits such as:
- A student loan repayment plan. This is a program designed to help employees get out of college debt and focus more on their savings goals. A sad reality is that almost 15 million millennials are more in debt than any other generation, which means employer-sponsored loan assistance is greatly appreciated.
- Emergency Savings Accounts (ESA). These “rainy day” accounts allow automatic deposits through payroll deductions and are designed to encourage healthy savings habits. Unlike 401(k) accounts, ESAs are taxed as income and can be accessed as needed without penalty. ESAs provide short-term liquidity that can help protect long-term savings in retirement accounts.
- Payday advance. As the name suggests, payday advance benefits provide employees with access to the salary they earned prior to the regular payroll cycle. While they don’t address the underlying problem of living paycheck to paycheck, they can help employees avoid costly payday lenders, late fees, and bank overdraft fees.
- Legal insurance. For employees struggling with significant debt or financial problems, a legal expenses insurance plan could also be a valuable asset, providing affordable access to legal counsel who helps them understand their options as well as the short- and long-term implications. long-term financial decisions. Like some insurers, legal insurance companies can offer their members access to a financial advisor for personalized advice.
By exploring new and existing avenues of financial wellness benefits, you’ll increase the overall value and appreciation of your customers’ offerings, which can be especially impactful in these times of economic volatility. Plus, the enhanced benefits will speak volumes for employees seeking help from their employer to meet their financial challenges. Reducing employee financial stress and insecurity and improving overall well-being is a win for them and, ultimately, your customers.
Denis Healy is a member of the ARAG® management team. He is a strong advocate for legal expenses insurance because he has seen firsthand how it helps people get the legal protection and help they need. He has over 30 years of experience in the insurance industry, with a particular focus on selling group voluntary benefits products to employer groups of all sizes through the broker community. and consultants.