Debt should be priority in financial wellness programs
As research continues to pile up about employees’ dire financial state, many employers are left wondering how best to help their workers become financially stable.
Step one? Help them get rid of debt.
“Debt is the biggest [financial well-being] issue right now,” Meghan Murphy, director of thought leadership at Fidelity Investments, said Tuesday during the NAPA 401k Summit in Las Vegas. “Debt is becoming a way of life for all generations.”
There’s a “huge focus” for employers to take action right now in helping employees pay down student loans, Murphy said. It’s an issue plaguing everyone from millennials entering the workforce with massive amounts of debt to baby boomers who have their own student loans and are looking to finance their children’s education as well.
“Not only is [student loan repayment] great for retention, but it makes employees feel great,” she said.
Though student loan debt is garnering more attention in the workforce, it should not be the only area of focus, she said. Credit card debt, 401(k) loans and mortgage loans should also be priorities. In particular, many employers are beginning to put plans in place for ways to manage 401(k) loans by limiting the number of loans allowed or putting a waiting period in place for employees to get the money. “People are very attached to the concept that they can have the money if needed, but we have to find a way to stop that.
“A lot of education is needed in the workplace with debt — student loan debt, credit card debt … there’s not a single focus. If [employees] can pay down debt in general, [they] can save more. Even if employees can save a little bit, with whatever tools we can build and whatever tools and engagement employers offer, that would go a long way.”
Emergency savings also should be a big area of focus for financial wellness,” Murphy said. According to Fidelity’s research, employees do not think long term when it comes to financial goals; 27% of employees only think about the next few months when it comes to money. People who lack emergency savings are twice as likely to say they do not feel good about their finances, Murphy added.
“Most people don’t have an emergency savings account, and most people who do are afraid to spend it,” she said.
What the industry should do — and is starting to do — is to come up with ways to automate emergency savings, similar to automating retirement accounts savings.
Overall, employees’ financial state is pretty dire, Murphy said, citing Fidelity Investment research. In addition to meager savings, financial stress is wreaking havoc in the workplace. More than half of millennials say they’re less committed to work when experiencing money problems, and 28% say they are distracted at work because of it. Another 24% of workers say they avoid medical treatment due to financial problems.
“It’s all very cyclical,” Murphy said. “If you have a health issue, it can impact your money; it can impact your job. If you have a money issue, it can impact your health; it can impact your job. And it all impacts our happiness.”
The overall takeaway is financial wellness is needed in a big way.
“Employees really, really want help to make financial decisions and employers are starting to step up to take this role,” she said.