Benjamin Franklin is credited with the saying, “A penny saved is a penny earned.”
The actual quote is a little more Colonial (“A penny saved is twopence clear”).
Either way, little could frugal Ben have imagined how hard it would become to save those pennies.
A $1 Trillion Problem
Debt in this country is increasing, up $117 billion in 2014 and climbing, according to the New York Federal Reserve Bank. Mortgages top the list, followed by auto loans, student debt, and credit cards.
And it’s an equal-opportunity problem. While young people report the most financial stress, people over 40 are carrying nearly 1/3 of the collective $1.3 trillion in education obligations, meaning they’re managing not only their own loans, but likely those of their children, and perhaps grandchildren as well.
As a result, the Government Accountability Office says many Americans are unprepared for retirement.
The Costs for Employers in Absenteeism and Productivity
All that financial weight is unsurprisingly cumbersome. How these challenges affect employees is obvious. But what they mean for employers is only just coming into view.
Unlike some other challenges, debt problems aren’t always so visible. People don’t bring it up, observed Bright Horizons Senior Vice President Patrick Donovan at the recent webinar, Employee Financial Wellness; Your $1 Trillion Problem: “It just isn’t something they’re going to really talk about around the water cooler.”
It might be hush-hush, but the pile of debt is nevertheless leaving a mark. The New York Federal Reserve Bank says billions of dollars in loans are past due. And experts are drawing a straight line between such debt and bottom lines. In their Benefits Trends report, MetLife says 81% of employees told them financial stresses had affected their productivity. The same study said that one-in-five employees have skipped work because of a financial problem. And more than a third of HR people told SHRM that their employees have called in sick because of a money-related issue.
With Kronos reporting that unscheduled absences add up to a whopping 35% of base payroll, employers are understandably concerned.
The Value of a Solid Financial-Wellness Strategy
As a practical matter, compensation will only get you so far, say experts. Besides, as Bright Horizons Chief Human Resources Officer Dan Henry pointed out in a blog, more money means more to manage. “It’s not about how much money they have,” he wrote, “It’s about how they manage it.”
Though college-loan repayment programs are gaining traction, so-called softer solutions that address management issues are credited with having a wide reach. Wayne Klieger, senior vice president of compensation and benefits for Neuberger Berman told the webinar that individual financial planning for employees and their families has helped promote the kind of stable financial wellness people are after.
He also credited college advising (time- and worry-saving strategies to apply, save, pay, and finance) for supporting both financial and mental wellness. Financial programs are gaining a foothold with younger employees, says Wayne, a trend that falls in line with Bright Horizons research showing Millennials thoughts about money and employment choices.
Generating Long-Term ROI
With absenteeism and productivity both substantial drags on bottom lines, such solutions promise significant ROI. Programs that ease the burden, observed Neuberger Berman’s Wayne, “have direct correlation to employee productivity and absenteeism.”
But realizing the greatest gains, added Patrick, will require employers to use employee surveys to learn specifically what’s hanging up their people. A survey by Bright Horizons, for example, illuminated retirement-savings challenges and resulted in programs that substantially moved the dial on financial wellness.
And the benefits of such programs, says Patrick, will be measurable for years to come. By 2020, a shortage of employees will leave companies scrambling for people. The employers who’ll come out on top will know how to help people establish financial wellness.
“It’s really a two-way street,” observed Wayne.” I think the employees need to be committed to doing this, and the firm needs to be committed to helping the employees.”
The Webinar, “Employee Financial Wellness: Your $1 Trillion Problem,” explores, and offers solutions to, today’s substantial money challenges. View the replay here.