A large paycheck should ensure long-term financial health and stability, right? It’s common knowledge that earning more money translates to increased financial security.
Unfortunately, the answer isn't so simple. Despite earning more money, particularly in high-paying roles, many people still experience significant financial insecurity. What could be fueling this disconnect between higher salaries and improved financial wellness?
Perhaps it’s time to look beyond bigger paychecks and towards educating our employees in basic economic literacy principles to form a foundation for long-term personal wealth. When it comes to overall financial success and well-being, knowledge may be more powerful than income alone.
In this article, we'll discuss how understanding core concepts of responsible financial management can help individuals achieve financial wellness, regardless of their paycheck size.
Minimum Wage and Savings
To help Americans across the continent, many states have opted to raise their minimum wage over the past year. Whether adjusting for inflation or separate legislation, NPR reported earlier this year that 23 states have increased wages.1
Nonetheless, a higher minimum wage is merely a quick fix to financial wellness – while encouraging in theory, it does not account for the larger issues that come with managing finances successfully.
Earning more money may seem like the most obvious solution to financial instability – but without basic financial literacy principles, individuals aren’t likely to reap long-term economic rewards.
For context, 61% of consumers in the U.S. are living paycheck to paycheck as of April 2023.2
What's more, only 36% of working Americans feel their retirement savings are on track,3 and a quarter of Americans have absolutely no retirement savings whatsoever.4
The sad fact is even if people earn more money, they might still have financial troubles due to simple gaps in knowledge – only when you close those gaps will they feel truly financially secure.
Improving Financial Well-being
With poor understanding comes unrealized potential. Your employees may not be setting themselves up for maximum future wealth no matter what your policies are providing them currently at work.
Since high wages do not guarantee sound money management habits, employers will need to take a new approach if they want to help their employees.
The best place to start? Investing in teaching employees about fundamental economic concepts.
Research has proven financial literacy's positive impact on financial wellness, as a greater understanding of finances improves money management and leads to better decision-making when it comes to saving, spending, and debt management.5
A strong financial education helps to combat financial stress, which, according to PwC, is half of Americans' largest stressor today.6 This stress can affect employees' mental and physical health,7 and even affect your company's bottom line.8
Financial literacy isn’t just an advantageous skill, it also helps employers foster healthier office cultures, too.
Although impressive salaries may draw top talent and industry leaders – investing in financial literacy training for your workforce can support wealth realization with long-term implications even after an individual leaves the organization.
Too often, organizations are not providing adequate financial training that extends beyond high wages. But why should they offer these services to begin with?
According to a study by NextGen Personal Finance, only a quarter of high school students receive some form of financial education from their institution before graduation.9 Beyond that, only 53% of undergraduate students feel they are prepared to handle their finances post-graduation.10
This means that a large portion of both college-educated workers and those that enter the workforce straight out of high school aren't prepared to manage their money. If your organization does not offer a financial wellness program, where else can these workers become financially literate?
By closing these gaps in knowledge, employees can get ahead and make their money work for them – rather than being dependent on minimal wage increases alone.
Promoting holistic and comprehensive financial wellness doesn’t require a complete overhaul of your HR department, either. This can be accomplished through targeted programming such as financial counseling, budgeting advice, or retirement planning services.
If you want to make a real change in the financial future of your employees, consider embracing financial wellness and understanding, not just higher salaries.
Financial Wellness by Enrich
Enrich's financial wellness platform presents you with a unique opportunity to prepare your employees for the future. The financial wellness platform gives you and your team an easy-to-use, integrated solution that can guide them toward greater financial success.
The program specializes in personal finance courses, budgeting advice, one-on-one retirement planning sessions, and wealth management simulations – plus more – all in an interactive platform. Both employees and employers will be astounded by the wealth of resources, tools, and personalized advice available at their fingertips.
Take this opportunity to elevate your team's financial wellness. Contact Enrich for a demo today, and see what better money management and financial empowerment can do for your organization.
1 - https://www.npr.org/2023/01/04/1146695193/minimum-wage-increases-2023
2 - https://www.prnewswire.com/news-releases/69-of-americans-in-urban-areas-are-living-paycheck-to-paycheck-14-percentage-points-higher-than-suburban-consumers-301832741.html
3 - https://www.pwc.com/us/en/industries/financial-services/library/retirement-in-america.html
4 - https://www.creditkarma.com/about/commentary/americans-have-a-net-worth-problem-and-its-not-positive
5 - https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9527722/
6 - https://www.pwc.com/us/en/services/consulting/business-transformation/library/employee-financial-wellness-survey.html
7 - https://www.apa.org/news/press/releases/stress/2014/stress-report.pdf
8 - https://www.healthadvocate.com/downloads/webinars/stress-workplace.pdf
9 - https://d3f7q2msm2165u.cloudfront.net/aaa-content/user/files/Files/NGPFAnnualReport_2022.pdf
10 - https://everfi.com/wp-content/uploads/2019/05/MoneyMatters-2019.pdf