Employees need reliable financial professionals and money tools now more than ever before. For many, the COVID-19 pandemic has created a challenging financial environment and exacerbated existing longstanding financial troubles. Carefully calculated, sound financial decisions contribute to a less stressful lifestyle and decreased anxiety. As a result, they create a more stable and happy workplace environment. But how many people actually have someone who can offer them credible financial advice? The reality is, not as many as you might think.
In this blog post, we’ll look at the value of financial health programs and why they should be a key component of your employee package.
64% of Adults Don’t Have Access to a Financial Health Program
The National Financial Educators Council (NFEC) conducted a survey in October 2020. In the survey, more than 1,000 people across the US were asked this “When you have a financial question, who do you turn to?” Their responses were startling:
- 39.7% said, “Friend, Family, or Co-Workers”
- 35.9% said, “Financial Professionals”
- 24.4% said, “No One”
Unbelievably, just over one-third sought financial guidance from professionals. For 64% of survey respondents, there was no place to turn for expert advice on financial matters. The NFEC went on to state that the “…survey results indicated that many people lack access to trusted, qualified professionals who offer financial guidance, especially the younger adults who responded.” This is disconcerting.
An All Too Typical Scenario – Meet Joe and His Tax Refund Dilemma
So, exactly what happens when an employee makes financial decisions without getting help through a financial health program or other services? What are the ramifications and the long-term consequences?
Let’s use Joe as an example. Joe is a single, 25-year-old customer service manager at a health care company. Joe received a $2,500 tax refund this year. He’s stoked about splurging on a new 80″ TV that he saw on sale. He’s excited by thoughts of watching sports with his buddies and how impressed his significant other will be.
Unfortunately, Joe also has a sizable chunk of debt. He’s racked up $2,500 on a credit card from a recent college alumni ski trip to Colorado. He also makes payments on a recent 401(k) loan of $10,000. Joe’s debt worries him, but he doesn’t realize the long-term implications of his current financial situation.
Joe has no idea how much the 21% interest on his credit card adds up to in dollars. Nor does he realize the risks of not paying back his 401(k) immediately. He hasn’t even considered what would happen if he were to get laid off or if he quit his job. Joe doesn’t have a financial health program or professional to turn to for advice on how to use his tax refund wisely.
So what does Joe do? He wings it.
Without an employer-sponsored financial health program, Joe “wings it” and purchases the $2,500 TV. He’s only thinking about the good times he’ll have. However, he misses the opportunity to put that money towards paying off his credit card. He only makes the required $50 payment every month, so it will take him 116 months (more than 9 years) to pay off his credit card debt. Furthermore, Joe will pay $3,269 in interest. And that’s if he doesn’t put anything else on his credit card.
What if Joe had Access to a Financial Health Program?
But what if Joe had consulted with a coach from a financial health program to help him make the best decision? How would he have used his $2,500 tax refund?
His personal coach would have looked at his entire financial situation and reviewed his goals. One of those goals is to buy a house within the next 10 years. After assessing Joe’s situation, the financial coach would have recommended that he pay off the debt. Why? The joy of buying a new TV wears off quickly, but the financial effects of paying off his debt would carry forward. This strategy would put him in a much stronger position to buy his future house within his timeline.
Taking a casual approach to finances, as Joe did, happens far too often. It happens because most people don’t have a financial health program to assist them with key financial decisions. And without proper guidance, the consequences of making poor financial decisions can be devastating with life-long effects. One wrong move can adversely affect credit scores and prevent an employee from qualifying for a home or car loan.
These are just two examples of adverse circumstances. What about the detrimental consequence of not contributing to a retirement fund at an early age or not paying off student loans more aggressively and owing more than you started with?
Moreover, some employees avoid taking any financial action due to uncertainty and fear of making the wrong choice. Finances are often the root cause of stress. In any challenging financial situation, employees may become disengaged, absenteeism may increase, and job abandonment may occur. Stress can also lead to larger medical issues.
Expert Financial Health Program
Providing financial health programs for employees with personalized coaching is more essential now than ever. Through SentryHealth’s partnership with BrightDime, WellOnMyWay members have access to a robust financial health program with real-life money experts (not robots) who empower them to plan a more financially secure future and reduce money stressors.
Plus, it offers innovative money management tools and easy-to-understand, tailored content for well-educated financial decisions that will prepare them for life-long success. This improves overall health and wellbeing and improves work satisfaction and productivity.