The Financial Stress & Mental Health Connection: How Employers Can Help
BrightPlan Team
As many people continue to grapple with financial challenges caused by the rising cost of living, economists are warning about a looming recession. This is increasing the financial stress many employees were already facing. In fact, BrightPlan’s 2022 Wellness Barometer Survey revealed that 72% of employees are stressed about their finances, and 77% report financial stress negatively impacts their mental health.
Depression, irritability and anxiety may accompany financial stress and ultimately impact employees’ working relationships and attitudes about their job. Financial stress can also lead to more sick days and reduced output. Our survey reveals that financially stressed employees lose on average 11.4 hours of productivity each week, costing U.S. employers over $4 billion annually.* A 2022 Financial Wellness survey by PwC revealed similar findings, showing that financially stressed employees whose mental health has been affected by money worries are less productive and less engaged at work. They’re also prone to absenteeism and are more likely to be looking for a new job. However, not many employees have the resources to take charge of their finances and are looking for support from their employers.
As finances impact multiple areas of employee well-being (physical, mental, and emotional) employers need to address financial wellness more directly and in a holistic manner. Here are some ways employers can support employees on their journey to holistic well-being.
Financial education & planning
Financial literacy is a major problem in the U.S with only 13% of employees having basic financial literacy. Employers can play a critical role in building financial knowledge by providing access to digital tools and resources that educate employees on fundamental financial principles, help them plan for their most important goals, and manage their money smartly to achieve these goals -- whether that’s saving for retirement, paying off debt, or sending kids to college. Employers can also provide valuable support to help employees make the most of their company-provided benefits.
Access to financial planners
A financial wellness program that enables employees to learn about personal finance and conveniently manage their money is core to achieving financial success. But to get the most out of the program, employees should also have access to financial planners. Seasoned financial planners can help employees spot gaps in a financial plan, give valuable validation that employees are moving in the right direction, and answer specific and personal questions about an employee’s finances. Additionally, a comprehensive solution should include financial planners trained in your company’s benefits package in order to drive adoption and utilization of the company’s 401(k), HSA, stock compensation, and other financial benefits.
Investment tools
Nearly 90% of employees expect their employers to offer tools for investing, according to our survey. Smart investing can help your employees outpace rising inflation and build wealth for the long-term. When offering a solution, look for one that provides investment analysis and recommends tailored investment strategies based on each employee’s goal, risk tolerance, time horizon and other preferences.
Equity compensation support
Often when employees leave their employer, they cite pay as a primary contributor. To encourage employees to stay at the company long-term, many employers offer incentives such as equity compensation as a part of their total rewards package. If you offer equity compensation benefits, help your employees understand the value of this benefit and how to exercise their options. Access to resources that give employees the ability to track estimated equity value, view potential value over time, and have visibility into trading windows can help employees better plan for their financial future.
Debt reduction programs
Many employees start their careers with a student loan burden, averaging $39,351 per student borrower. In addition, workers of all ages are accumulating credit card debt. Continuous accumulation of debt often leads to a debt spiral, making debt payment a more urgent need than putting aside money for retirement. For these reasons, many employers are stepping up to help their employees pay down debt through company contributions, diverting a portion of the 401(k) matching funds to debt payment, or educating them on their debt repayment options.
Emergency funds
The economic fallout of the COVID-19 pandemic has prompted many employees to realize the importance of saving for emergencies such as unexpected job loss, healthcare expenses, and added caregiving responsibilities. Experts say that workers are less likely to dip into their 401(k) plans and other retirement savings if they have access to funds to meet short-term, urgent needs. Some employers are helping their employees save for the unexpected by creating emergency savings accounts that are funded directly through payroll deductions.
Retirement planning
Our survey shows that economic uncertainty is leading employees to prioritize retirement planning, with employees contributing significantly more to retirement during this time. Further, a study by SHRM showed that 77% of working Americans believe that retirement savings such as 401(k) and pension plans are one of the most important employer-sponsored financial wellness benefits. If you offer a 401(k) match, remind employees of the contribution your company is making toward their retirement goals and encourage them to contribute at least enough to get the full match.
Given the impact of financial wellness on all other areas of employee well-being, supporting employees’ financial well-being is of utmost importance. It’s not just about how much employees earn but how well they are in control of personal finances, their ability to meet financial obligations, and how secure they feel about their financial future.
