t’s Up to HR to Save America’s Financial Future
It’s no secret that most Americans are struggling financially, even those with good jobs. The question is, what do we do about it? Obviously the status-quo isn’t the answer, because that’s how we got here.
The American workforce is in trouble financially, and it affects way more than the dream of a comfortable retirement. The current financial tools available to the average American aren’t designed to help with the basic first steps people need to take towards financial health. It’s not that the existing institutions are thoughtless, but it’s difficult to make any money encouraging people to do things that are free (like setting a budget or opening a free checking account).
In order for the problem to be fixed, a Hero needs to be found: a Hero who has it in their interest to help the American workforce, a Hero who has the tools to provide benefits to hardworking Americans, a Hero who has been overlooked in their capacity to help. That Hero is HR.
The Current Financial Crisis
Despite improvements in the economy and a decrease in the unemployment rate, 76% of workers are living paycheck to paycheck.1 Some of this results from stagnant wages against a backdrop of rising cost of living, but overspending also plays an important role. Most of us are programmed to spend up to our means, and with credit card and home equity lines of credit, it’s not hard to spend past your means.
Today’s workers are not putting funds aside for emergencies, which means that they are not prepared for expenses such as unexpected medical bills or car problems (63 percent of Americans say they’re unable to handle a $500 car repair or a $1,000 emergency room bill).2 Financial insecurity leads to significant personal stress, which impacts worker productivity. What’s really telling is this: The individuals who expressed concern about their financial health included those on the higher end of the income spectrum.3 This isn’t just a low-pay problem; it affects those who make larger wages. Remember that thing about people spending up to their means? Even if someone makes more money, they just tend to spend more.
Financial stress extends beyond immediate concerns related to living expenses. Most employees (61 percent) name retirement as a serious financial concern, and in Mercer’s 2015 survey, workers showed significant pessimism when it came to their opinions on how well their savings strategies are working: 39 percent said they expect to work at least part-time after retirement, and 35 percent are considering delaying their retirement due to financial concerns.4
401(k) Plans Aren’t the Answer
But wait, we have 401(k) plans, and they help people save for retirement! Although the 401(k) is a great tool with excellent intentions, the results of their almost 40 years in the workplace have been less than spectacular. Many employees simply aren’t ready or well-enough informed to take advantage of retirement programs. They can’t focus on retirement savings while monthly bills go unpaid. On top of that, the financial advice that comes with many 401(k) plans focuses on stocks, bonds, allocations, and annuities: completely missing the mark.
Many employees lack the personal financial knowledge to determine how much to save, how to properly use credit, how to get out of debt, and how to manage any remaining income. Advice on these topics is not usually offered as part of the 401(k) package, meaning the 401(k) doesn’t get used by many employees (31% of employees have $0 saved for retirement).5 After all, who can have a conversation about bond allocations when they can’t afford their rent or mortgage? The 401(k) plan is not the Hero we need.
We Won’t Be Saved by Standard Financial Services
There are many financial products and services in the marketplace. Unfortunately, because of the small margins that financial institutions make off of their services, people that don’t have large amounts of money to invest aren’t profitable for those institutions to focus on. Because of this, the current financial institutions are not incentivized to invest in creating and marketing solutions geared towards people on the lower end of the income spectrum. In addition, many of the services that people need (free checking accounts, budgeting tools, etc.) are very difficult to get any sort of revenue from. There’s just no profit in encouraging people to do free things.
Unfortunately, most profits derived from serving the under-banked tend to come from predatory products like high-interest pay-day loans and other detrimental products. These aren’t the tools that American workers need to improve their financial situations. In fact, they frequently make money problems worse for people. The existing financial services aren’t the Hero we need.
HR to the Rescue
HR professionals have a special interest in providing financial wellness to workers, because HR’s goals are furthered by the effects of good financial health in the workforce. Personal finances are a major driver of employee engagement. Employees that don’t have money troubles on the brain can focus on efficiency and productivity, while an employee worried about making this month’s rent is far less likely to be giving their all at work. Improving the financial wellness of employees results in lower overall expense to the organization through reduced absenteeism, presenteeism, and turnover.
HR has an extraordinary chance to change how the financial story ends for many Americans. By offering comprehensive, easy-to-use financial wellness programs, HR can help staff members improve their personal finances. Such programs provide guidance through every level of financial need, resulting in a workforce with fewer immediate financial worries, allowing them the ability to improve today as well as look forward to a well-funded retirement. HR and the company providing the financial wellness program stand to benefit from the results of a financially healthier workforce.
HR has frequently been thought of as an office that handles a few essential personnel functions, deals with compliance, and brings in new employees. It wasn’t clear before that HR has the keys to a solution that could impact the entire country. The solution comes through HR’s ability to provide benefits, HR’s need for happy and healthy employees, and HR’s impact on every worker in America.
Finally, we have it! We’ve found our Hero who has it in their direct interest to help the American workforce, our Hero who has the tools at their disposal to provide benefits to hardworking Americans, our Hero who has previously been overlooked! HR is our one great hope to get off the path we’ve been going down. The impact after just a few years of widespread adoption of financial wellness benefits at American corporations can mean the difference between a country that struggles to support its workers and retirees, and one that can boast strong finances for everyone. HR to the rescue!
Creating a Strong Financial Future
If current financial trends continue, the average American worker will continue to struggle with day to day expenses and a comfortable retirement will be more out of reach than ever before. Increased debt, leaner retirements, and continued financial stress are in our future.
An alternative is possible. HR has an opportunity to supply the tools needed to achieve financial security for millions of hard-working Americans. By offering relevant, personalized financial wellness solutions today, HR can create a better future in which employees enjoy less stressful financial situations and look forward to a comfortable retirement, thanks to better saving habits, lower debt, and well-funded retirement accounts.