How to boost financial security and savings among low-income workers

Helping employees save for their financial future is a top priority of employers. But what about helping workers improve their finances in the present?

For low- and moderate-income workers, making ends meet week to week can be an uphill battle. The resulting financial stress can amount to $250 billion a year in lost productivity, says Timothy Flacke, executive director of Commonwealth, a nonprofit that aims to boost financial security across the workforce. But there are simple steps employers can take to create some peace of mind for these valuable workers.

“Recognizing and prioritizing that employee and giving them constructive tools to createfinancial security and savings, there’s a lot of rewards for that employer,” Flacke says. “There’s really room [for employers] to talk to some of their existing infrastructure and find new ways, with minimal costs, to introduce helpful programs.”

Read more: Working Americans are in a savings crisis — and employers can help

From emergency savings funds to earned wage access, Flacke points to a number of options that employers can explore to hopefully find a solution that uplifts their employees. And as most financially vulnerable households, he explains, are disproportionately women-led, Black or Latinx, improving financial comfort won’t just support individual workers, but can help build a more equitable workforce.

Flacke spoke with EBN about why it’s so hard for employers and employees to talk about financial issues, how to make those conversations easier — and how to find solutions that work.

Why do low- and moderate-income workers so easily get overlooked by financial benefits?
When you are living paycheck to paycheck and money is tight, one of the effects is that you really live much more in the financial present — it’s a very short-term, immediate sense. And yet, for entirely understandable reasons, much of our employee benefits and resources are focused on longer-term questions, obviously one being retirement. So there’s a conceptual disconnect. Workers spend a lot of energy worrying about making sure there’s enough cash to cover their bills or their next loan payment; helping that worker be less stressed and more present, that drives business success. There’s no reason why this shouldn’t be a shared agenda.

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So then why is there that disconnect? Why aren’t employers and employees talking to each other about these issues?
Most of us are uncomfortable talking about finances, generally — and there’s a lot of data on that. And when we expect that conversation may involve people who are suffering in some sense, we’re even less likely to want to have that conversation. If you’re a benefits or HR professional, you may be aware of this issue, but not really know what to do about it. And a third thing is, there’s still a question of employers’ role in addressing these issues.

There’s a widely accepted idea in this country that it’s the employer’s business to play a role in financial security in old age, in retirement. But that’s not always true when it comes to shorter-term financial needs. Before the pandemic, we did a national survey asking about financial insecurity, and we were surprised to find that 65% of Americans do think employers should help more with financial security. So that’s shifting.

When it comes to helping low- and moderate-income workers get on surer financial footing in the short term, what have you seen really work?
Helping people develop short-term liquid savings is the ideal tool to manage any volatility. We’ve worked with UPS to help them add an emergency savings option for 90,000 of their non-union workers, and part of that work was really using our research to understand how to communicate that opportunity to workers. It takes more than just a rational diagram-and-dollars communication to connect with people.

Read more: 10 jobs with the biggest salary increases amid the great resignation

What does it take?
There are four non-financial factors that are important to these conversations. First is a journey mindset — which is making sure that workers feel that where they are today isn’t the end of their story, but that they have room to grow. The second is creating value-centered motivations, and the third is a social network, someplace where they see the kind of financial situation they want to be in. And the fourth is messaging that is inclusive. So from words to imagery, if a company can speak to those four factors, it can be successful.

Communication aside, what are some actual programs that have helped boost savings and financial security?
For UPS, Voya is their 401(k) recordkeeper, and they’ve been working together to introduce an emergency savings program within the 401(k), as an example. We’ve been working with Best Buy to study their existing programs around emergency savings. There are also a lot of conversations in this space around earned wage access and daily pay, or emergency cash assistance programs.

The ability to split direct deposits is a feature that almost any employer typically has access to through their payroll system, yet it’s wildly underutilized. And this would let an employee put some of their paycheck into a savings account automatically. Now, is that going to solve a worker’s financial security issues? No. But it can play a powerful role in helping them build savings.

Read more: Why some gig workers are struggling to access their COVID sick pay

For employers who want to help but don’t know where to start, what advice can you offer?
Large benefit providers really want to be responsive to their clientele, and clients can get their attention. So I’d encourage firms to start asking their recordkeepers and other providers for new solutions. In part because they might offer something that you don’t know about, and in part because they might be developing new solutions and could be swayed by what you ask for. You don’t necessarily have to strike an entirely new relationship.

That said, there is a rapidly evolving marketplace of innovators in fintech, and if you’re not finding any satisfaction with current providers, do the research — make some calls to providers who are addressing the needs of your workforce.

And of course, take stock of your workforce. Understand what’s happening in their worlds. Understand what problems you can solve for them.