Why A Financial Wellness Component Is Necessary For Your Clients’ Benefits Package.

What creative benefit plans can you provide your clients to assist staff in overcoming these obstacles and, more importantly, regaining their financial stability?

 

Let’s face it, no matter how the experts characterize the nation’s current economic instability, American workers continue to suffer from the sharp sting of growing prices for essential daily living necessities like food, petrol, and housing. Financial insecurity is becoming a reality for some of them who are struggling to make ends meet.

As those financial worries intensify, they may have a negative effect on employees’ productivity, personal relationships, and future goals. Additionally, 93% of workers look to their companies for assistance with financial wellbeing. The question then becomes: What creative benefit packages, such as financial education and tools, debt repayment assistance, and financial counseling, can you provide customers to assist employees in dealing with these issues and, more importantly, get back on solid financial ground?

 

By the numbers: Effects of inflation on workers

Let’s start by looking more closely at some of the things that are driving these financial problems — and the impact they are having on employees. Unsurprisingly, housing costs and daily expenses are Americans’ top concerns:

• Even while home prices are still about 11% higher than they were a year ago, the housing market is being severely impacted by increasing interest rates. This is crushing demand and driving up the cost of purchasing a home by several hundred dollars every month.
• Additionally, during the first half of 2022, rent rates for single-family houses rose sharply, reaching a national average of $2,495 per month — a 13.4% rise in comparison to the same period in 2021.
• While the national average for the US has lately decreased by almost 20% from a high of $5.08 per gallon in June, the current average ($4.08/gal) is still almost twice as high as it was in 2020.
• The highest annual increase in food costs since March 1979 occurred in July, when prices increased 13.1%.

Financial shocks, as defined by Pew as a substantial loss of income or a sizable unforeseen expense, such as a trip to the hospital or a sizable auto repair, rise in tandem with rising debt. In actuality, 60% of Americans encounter financial shocks, and a third do so twice or more a year. Due to the fact that approximately 70% of American families lack emergency savings, this increases their financial burden. These expenses average $2,000, which is equivalent to half of the median household’s monthly income.

 

The effect on the workforce is clear. According to a recent survey by financial services firm SoFi, about half of workers are more anxious about their money now than they were at the height of the epidemic, and they spend approximately 25% of their workweek resolving these problems. What is the irony of this growing worry? Only 13% of the workforce believes they can talk openly about money at work and obtain the aid they need, despite the fact that the majority of workers report feeling financial pressure.

Cynthia Campbell, Chief Experience Officer at BALANCE, an organization that offers complete financial counseling and education services, is one person who has assisted workers in overcoming this double-edged sword of debt.

Campbell shows how people have been confused by this protracted inflationary period. When job losses were substantial due to the pandemic, we observed that consumers used borrowing as a “safety net.” Even if we now record low unemployment, the average family is still having difficulty since rising costs for things like petrol, groceries, clothing, etc. are having a negative impact on household finances. People are once again using credit, but now that interest rates have increased, credit is more expensive. As the sum grows, the minimum payment due each month climbs as well, but the budget cannot accommodate this.

The average credit card debt held by families in the United States increased by 13% in the second quarter, the highest growth in such debt since 1999, according to a report released by the Federal Reserve Bank of New York on August 30.

According to Campbell, the biggest obstacle for many people is frequently simply acknowledging they need assistance. Some people find it difficult to ask for help. However, there seems to be a sense of comfort when people discuss their financial problems and share the stress that comes with it with another person.

Then, financial counselors can collaborate with staff members to develop a strategy to address the individual financial problems they are facing, such as debt payback and student loan payments, credit score restoration, and planning for a more secure financial future.

“Employers underestimate the effects that concern over money has on their workers. An employee won’t be totally present at work if they are anxious about their financial condition. They can also believe they require a higher-paying position, she says.

Campbell contends that it is in companies’ best interests to be concerned about their employees’ financial wellbeing, just as they are with their physical and mental health. The modern job seeker is searching for an employer who values their “whole person” and encourages them to be themselves at work.

 

Experiencing financial stress firsthand

I’ve collaborated with Jeff LeMay, Director of ARAG Customer Care and Claims, for a number of years. He manages a team of Customer Care professionals who are on the front lines, so to speak, of handling members’ problems and requests for legal support – many of which really start out as financial challenges.

“Members with queries about declaring bankruptcy are rather prevalent,” LeMay observes. They frequently aren’t sure if declaring bankruptcy is the best course of action, but they are stressed out because they are buried in debt and have no idea what else to do.

“We’re also hearing from workers who are having problems repaying their student loans from college. Given that federal student loan forbearance, which is essentially a stop in payments, is set to expire on December 31, we anticipate this to be an even bigger problem in 2023.

Other causes of financial insecurity include housing issues and unanticipated medical expenses. Members seek legal assistance since their monthly rent has increased and they are unable to pay the higher amount, according to LeMay. Some members must also deal with unforeseen medical expenditures that they cannot afford to pay, which may finally result in debt collection.

Employees who are thinking about making significant decisions, such as bankruptcy or debt consolidation, deserve qualified financial and legal advice to:

• Understand what each option entails
• Know their short- and longer-term implications, and,
• Find budgeting strategies to keep moving toward financial health

LeMay continues, “There are a lot of fears and many Americans are in a world of unknowns. However, once they have a resource to turn to and are on the right track to address their problems, it is a huge relief since it relieves them of both the financial and emotional weight.

 

Find out what’s hidden in the benefits offered today.

You might already be contributing to the solution to assist workers improve their financial wellness. Review the current employee benefit packages and services offered by your clients as a starting point for your program on financial wellness. For instance, the financial, banking, or life insurance partners of your company may have resources, software, or websites created specifically for your staff that you may not be fully advertising. Opportunities for financial education provided by retirement plans may fall under this category.

 

Think outside the box, though.

Think about what benefits can complement your current initiatives and provide employees a boost to greater financial wellness. This might entail supplying advantages like:

• A plan for repaying student loans. Employees can use this program to reduce their debt from student loans and put more of their attention into saving objectives. The regrettable fact that more millennials than any other generation have school debt means that employer-sponsored loan aid is greatly valued.
• Savings accounts for emergencies (ESAs). These “rainy day” accounts, which enable paycheck deductions for automatic deposits, are intended to promote good saving practices. In contrast to 401(k) funds, ESAs are taxable as income and are freely usable as needed. ESAs offer quick cash that could aid to safeguard retirement account long-term savings.
• Advance on salary. Salary advance benefits, as the name suggests, provide workers access to the money they have earned before the regular payroll cycle. While they do not deal with the fundamental problem of living paycheck to paycheck, they can assist workers in avoiding costly payday lenders, late fees, and overdraft costs at banks.
• Legal insurance. A legal insurance plan could also be a beneficial asset for workers who are struggling with large debt or financial problems by giving them cheap access to legal assistance that enables them to comprehend their options and the short- and long-term effects of their financial decisions. Legal insurance firms, like some insurance companies, could give members access to a financial advisor for individualized guidance.

You’ll boost the total value and enjoyment of your clients’ products by looking into both new and established financial wellness advantages, which can be especially important in these uncertain economic times. Additionally, the improved benefits will say a lot to workers who are turning to their companies for assistance in resolving their financial issues. Employees and eventually your clients win when financial stress and instability are reduced and general wellness is improved.

 

 

 

 

Source: https://www.benefitspro.com/2022/11/02/why-your-clients-benefits-package-needs-a-financial-wellness-component/