Contrary to what most people might think, higher income actually doesn’t mean lower financial stress. Research shows that 40% of Americans with a salary of $100,000 and higher still struggle with personal finances. About 34% of the population live paycheck to paycheck, and one in four of them actually earn upwards of $160,000.
With the pandemic having a massive impact on employee financial health, CEOs need to be more proactive when it comes to their employees’ financial health. Here’s why:
The Effects of Poor Financial Health on Your Bottomline
Next to job pressure, money is cited as one of the main reasons behind stress, according to the American Institute of Stress. People worry about their work stability, retirement, and expenses, all of which contribute to the state of their financial health. And this naturally affects their performance at work. In fact, Forbes found that employers lose half a trillion dollars every year due to poor performance and high absenteeism because of financial stress.
Research indicates that when employees have money problems they are more prone to anxiety and depression. Their unstable emotional state might also create a negative working environment. Financial stress can also manifest physically, and people can develop symptoms such as headaches, high blood pressure, even heart disease. Furthermore, people experiencing financial stress might also turn to unhealthy coping mechanisms, like substance abuse and overeating. This can result in the deterioration of your employees’ overall wellbeing, detract from their focus, and lead to high absenteeism and turnover rates.
How You Can Support Employee Financial Wellness
Though you can’t intervene in your employees’ financial health and management, there are ways to set them up for success:
Educate Employees on Financial Management
One way to help employees is to teach them to use financial wellness tools that help them with financial management. Budget apps like You Need A Budget (YNAB) provide users the ability to tracking every single dollar they spend. It also lets users review how much they save each month, how to break down their expenses, and how much they overspend by.
Savings calculators also make it easy for people to have a long-term vision when it comes to their personal savings. Say an employee is interested in various account options to safeguard their child’s education, they can use online calculators to find out what is the best option. For instance, they can look at time deposit accounts like certificates of deposit (CD). A CD calculator will compute the amount of interest their initial deposit will earn over the term length they decide on. Then they can compare it with the interest earned on a high yield savings account (HYSA) using an HYSA calculator, or compare it with the interest they can earn on a money market account. These resources are free to use and can really help your employees get a better sense of their finances and plan for the long-term.
Meanwhile, debt payoff apps help make sure they don’t accumulate too much debt, as this can make it difficult to accomplish goals, such as buying a house. The Debt-Free app uses the debt snowball strategy, which is prioritizing the smallest balance. But they can also choose to prioritize the highest interest rate or highest balance.
Review Your Company’s Benefits and Employee Assistance Programs (EAPs)
Reviewing what your company offers employees can help prevent the possibility of them living from paycheck to paycheck. Do you currently contribute to employees’ HSAs or their retirement plans? Though it is not required by the IRS, many medium to large enterprises match their employees’ 401(k) retirement plan. Health insurance and retirement plans are great financial incentives, which can also be good for your bottomline. If your employees are not stressing out about their finances, they can be more productive and motivated to give back to a company that supports them.
Employee Assistance Programs (EAPs) can also be used to extend your help to employees and their personal situations, which can include finances. What you can do here is to introduce a financial wellness program, through which you can bring in financial professionals to host webinars. The topics can include financial goal setting, saving and budgeting, investments, debt management, and retirement planning. Furthermore, you can consider providing employee loans as part of your EAP. This can help employees who are having trouble getting approval from financial institutions, which can help in managing their debt and expenses.
The coronavirus has impacted employees from various industries, affecting their overall well-being. Before employees experience health problems and resort to leaning on unhealthy coping mechanisms due to financial stress, employers need to guide them towards financial stability.
Exclusively written for theceoviews.com by Jessa Bennett