4 Important Things Financial Wellness Programs Teach Employees About Weathering Financial Storms

Wouldn’t it be wonderful if your employees could work, use their paycheck to pay their expenses, save money, and then retire – all without ever facing a financial setback? Unfortunately, this isn’t a very likely scenario.

Unexpected events occur that can wreak havoc on your employees’ finances. Things like an unexpected illness, a major home repair, a child marrying earlier than expected, a car accident, or (as was experienced most recently) a global pandemic. 

For employees who are unprepared for these financial storms, recovery can take years. For some, recovery doesn’t ever happen. 

However, this doesn’t have to be your employees’ fate. Instead, offer a holistic financial wellness program that teaches them the four steps needed to prepare for and weather financial storms.

#1: Create an Emergency Savings Fund

An emergency savings fund contains money to be used for emergencies or loss of income.

Having an emergency savings fund is an integral part of your employees’ financial wellness because it gives them the needed funds to pay for the unexpected without resorting to the use of high-interest credit cards or personal loans.

However, many of your employees do not have adequate savings.

A recent Bankrate survey¹ found that half of Americans do not have an emergency fund with enough money to cover three months of expenses.

Sadly, half of those do not have any emergency funds at all. Only one in four have the six to nine months of expenses recommended by financial advisors.

Keep Reading: New Health Study Shows Widespread Employee Financial Insecurity

A financial wellness program can help employees understand how to create an emergency fund and how to calculate the needed funds.

For example, most employees understand that they need six to nine months of resources for food, shelter, and utilities but forget that they also need money to continue paying down their debt, including student loan payments.

Additionally, employees will learn that emergency funds need to be:

• Accessible – These funds cannot be tied up in accounts with access restrictions or that trigger fees or penalties for withdrawal. 
• Separate – Employees should have a separate account for emergencies rather than money sitting in a checking account or as part of their retirement fund.
• Safe – Although it is possible to put these funds into an interest-bearing account, employees should not try to invest this money using risky investments. The point is to have money available even if the market is falling.

#2: Understand Insurance Needs

Many financial emergencies can be mitigated with the proper insurance. Consider the following:

• Medical insurance can offset medical emergencies
• Life insurance can offset the effects of the death of a breadwinner
• Disability insurance can offset personal injury
• Homeowners insurance can offset storm damage to a home
• Car insurance can offset a car accident resulting in a totaled vehicle
• Pet insurance can offset the cost of a pet’s illness
• Dental insurance can offset the cost of a necessary root canal and crown

Although these insurances may require a deductible, they will help with the cost of emergencies. 

Offering a financial wellness program can help employees determine what insurance they need based on their individual circumstances.

#3: Budgeting

The Pennyhoarder² found that 55% of Americans do not use a budget. Of these, half don’t think budgeting is necessary, 19% say they just haven’t gotten around to doing it, and 6% say that even if they budgeted, they would overspend. 

The truth is that those who create a budget and stick to it see great results, including:

• Paying bills on time
• Getting out of debt
• Increasing credit score
• Saving for major purchases
• Creating an emergency account
• Saving for retirement
• Less financial stress

A strong financial wellness program will help employees learn how to create a budget based on their personal circumstances. 

#4: Avoid and Reduce Debt

Personal debt for Americans is rising. ValuePenguin³ found that:

• Total credit card debt in the US is $807 billion
• Average credit card debt is $6,270 per family
• 45.4% of families carry credit card debt

When including mortgages, home equity lines of credit, personal loans, and student loans, the average household debt rises to $155,622. That’s up 6.2% year over year from the end of 2020 to the end of 2021⁴.

The problem with debt and emergencies is that employees are left trying to deal with both at the same time.

Employees with little debt have an easier time saving for emergencies and need less monthly income to survive if an emergency strikes. 

By offering a financial wellness program, employees learn habits that keep them out of debt and learn methods of reducing the debt they already have.

Financial planning can make a difference to your employees in times of financial difficulties.

Learn More About The State of Workplace Financial Wellness

1 - https://www.bankrate.com/banking/savings/emergency-savings-survey-july-2021/

2 - https://www.thepennyhoarder.com/budgeting/budgeting-statistics/

3 - https://www.valuepenguin.com/average-credit-card-debt

4 - https://www.cnbc.com/2022/01/11/amid-rising-prices-us-households-fall-deeper-in-debt.html