The financial benefits that employers have historically offered don’t enable employees to take immediate action on their financial pain points. Traditional offerings like calculators, classes and coaches may help workers prepare for a better future or lay the groundwork for new financial habits. But they leave workers feeling at fault — and don’t offer much real help to make bad situations better.
“The financial wellness industry, as we know it today, has been in place for more than 30 years. It’s not solving the problem as an industry right now,” said Michael Woodhead, Chief Commercial Officer at FinFit, a financial wellness solution provider. “As a matter of fact, the problem is getting worse despite our best efforts.”
According to a recent study of 1,200 U.S. workers by FinFit and HR Dive’s studioID, the average employee faces a spate of financial problems. When the data was broken down by race and gender, it showed that underrepresented employees — specifically looking at employees of color and women — typically experienced these financial issues in greater numbers. They also advocated for more actionable financial benefits with greater force, indicating that effective benefits may provide a particularly strong return for underrepresented employees.
“This report underscores that the financially frustrated and the financially unhealthy are not in the workforce. They are the workforce,” said Matt Bahl, vice president of workplace financial health at the nonprofit Financial Health Network. “And because of that, any organization … needs to understand how financially frustrated or financially precarious their workforce is, because undoubtedly it could have downstream impacts on their business.”
Who’s living paycheck to paycheck?
One of the most revealing questions in the survey asked participants whether they considered themselves to be living paycheck to paycheck. Seventy-four percent of all survey respondents said yes. The numbers skewed higher among underrepresented employees. Eight-one percent of Black or African American respondents said the same thing, as did 79% of Hispanic or Latino participants.
Living paycheck to paycheck was slightly less common among Asian and multiracial or biracial respondents, 73% and 66% of whom characterized their finances as paycheck to paycheck, respectively. Seventy-two percent of White or caucasian respondents said the same of their finances.
Similar splits occurred between men and women in the survey. While 71% of men said they lived paycheck to paycheck, 76% of women said the same thing.
The effects of living paycheck to paycheck are profoundly negative, Woodhead explained. “Living paycheck to paycheck is, by definition, going to result in financial stress,” he said. Whenever someone with tight finances experiences an unexpected financial event, it creates immediate hardship. Without a cash buffer, employees living paycheck to paycheck will experience unpredictable financial stress regularly.
The survey results spoke to this reality, as they continued to show how underrepresented employees typically reported financial stressors in slightly higher numbers than their white, male counterparts.
The benefits that will help
Survey respondents from underrepresented groups also demonstrated stronger interest in financial tools that would allow them to take more immediate, direct action on their financial pain points. Forty-two percent of women said their top choice for a new financial benefit would be a tool to help pay down existing or avoid future debt, as opposed to 36% of men.
Similarly, 53% of Hispanic or Latino respondents most wanted access to a benefit that would help them save money, compared to 49% of White respondents. Slightly more Black or African American and Hispanic or Latino respondents indicated that the benefit that would have the greatest impact on their financial well-being was an emergency savings account — the most popular option overall.
Employers that provide benefits like these empower workers to improve their financial standing. Employees living paycheck to paycheck often get stuck in a cycle of financial frustration, Woodhead explained. They incur debt, their credit scores sink and they lose access to more affordable, reputable credit. When they next need extra funds, they may feel forced to turn to more predatory lenders, resulting in more debt and decreased credit scores.
When employees have access to emergency savings and affordable credit, no matter their scores, they can begin breaking this cycle. This empowerment may be particularly meaningful to diverse employees, as the survey indicated that underrepresented respondents showed elevated financial frustration and higher interest in relevant financial benefits.
“Employees from underrepresented groups are asking for financial wellness assistance from their employers,” Woodhead said, “And employers have the tools at their disposal to help workers out — but helping them is not simply a philanthropic initiative.”
Financial wellness tools provide workers with the skills and resources to get out of debt and thrive financially. It also creates trust between the worker and the organization, resulting in employee loyalty.
“At a time when organizations are laser-focused on retaining top performers,” Woodhead said, “building loyalty is paramount to long-term business success.”