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Thought Leader Uncategorized Financial Inclusion

Finding Financial Wellbeing in the Workplace

Operation HOPE

Anita Ward, President Operation HOPE

Jessica created an amazing product – a journal to help students prepare for exams.  The demand proved strong, and she quickly required more inventory. Offshore manufacturers offered better pricing, so she placed an order in China.  When the shipment arrived, Jessica faced unexpected tariffs and needed money to release the shipment or it would have been destroyed.  Although she was employed full-time, without a credit score and a credit history her options were limited. Desperate, Jessica turned to a payday lender to borrow $4,000.  Twelve months after securing the loan, due to the exorbitant interest rate, she has repaid $3,600 and still owes nearly $3,000 on the original loan. She cannot find a light at the end of this tunnel of debt.

Unfortunately, Jessica’s story is not unique.  Every year more than 12 million Americans sign up for payday loans that come with higher interest rates, harsh repayment terms, and hidden fees.  These borrowers struggle financially, have bad credit, and have no other options.  The loans are marketed to help people through emergencies, but in fact 69% of these borrowers use the loan to cover recurring expenses like credit card payments, rent, and even food.  They are financially unstable and unhealthy, and payday lenders trap them in a debt spiral.

This phenomenon carries into the workplace. More than half of US workers are financially stressed on the job.  Though they try to hide it, seven out of ten employees stress about money at work and say that it impacts their focus, performance, and relationships.  These financially unhealthy employees spend 28 hours a month worrying about money. The facts are astounding – 54% of employees are stressed about their finances; 2/3 of American workers live paycheck to paycheck; and 63% of employees have inadequate emergency funds. 48% of US employees have financial worries, which costs employers 11-14% of annual payroll cost in lost productivity and increased employee turnover.

Financial wellbeing is a critical component of effective employee wellbeing yet it is often overlooked. New alternatives to payday lenders are emerging to provide financial coaching and lending options through employee benefit programs. Employers are engaging firms that offer financial coaching, supporting resources and salary-linked loans.  This approach to financial wellbeing helps employees improve credit score, reduce debt and develop savings behaviors.

Traditional perspectives on workplace wellness focus on physical wellbeing, exercise, and nutrition, but more employers are including financial wellbeing.  USAA is a great example of a financial well-being program designed to help employees with their finances. The program includes setting a personal budget, managing unexpected financial challenges, establishing a will and planning for retirement.

Financial literacy, empowerment, and independence are vital in the workplace where people make some of their most significant financial decisions. Two examples of socially responsible pioneers in the financial wellbeing space are Operation HOPE and Salary Finance.

HOPE Inside the Workplace offers comprehensive financial coaching in person, on the phone, online, in groups and individually one on one. HOPE Financial Wellbeing Coaches help employees raise credit scores, resolve errors on their credit reports, negotiate bad and stressful debt obligations, and counsel employees to financial wellbeing. Certified coaches provide workshops, lunch-and-learn sessions, webinars, and individualized coaching to help employees attain financial freedom.  Through this program employees achieve financial resiliency that helps protect them from emergencies and disasters.

Salary Finance provides employers with a cost-free financial wellbeing platform that includes financial education, coaching, budgeting, credit score access, and salary-deducted personal loans.  Recognizing that borrowing is not always the answer to a financial challenge, even at the affordable rates of 5.9% to 19.9% and terms of 12 to 36 months, Salary Finance has created safeguards and mechanisms to help employees achieve financial wellbeing. Employees are limited to one loan at a time; borrowers are referred to financial coaches, like those at Operation HOPE, when appropriate; and loans are designed to build credit. Loan repayment is facilitated through salary deductions that immediately credit payments against an employee’s loan. Credit scores improve as credit history is reported, and financial anxiety is eliminated.

The goals of programs like those of Salary Finance and Operation HOPE are designed to move people from surviving to thriving mentalities and to open the door to new conversations around savings, 401K plans, retirement, and wealth.  While many organizations provide retirement planning, a majority of them do not offer credit score monitoring or financial literacy programs, and even fewer offer salary-deducted loans. An American Express Financial Advisors study found that 85% of employees want to receive financial information and programs like these in the workplace.

The results of employer sponsored financial wellbeing programs are compelling.  Employees report improvements in confidence, feelings and attitudes toward personal finances.  Behaviors change as a result of the programs.  Employees establish goals, create bill paying plans, build emergency savings, improve credit scores, and reduce debt. Smart companies are recognizing that financial stability is an important employee benefit.

In a world of uncertainty, financial freedom equals security. When employees are struggling with their finances they can experience anxiety and stress, which have a direct impact on their professional life.

Financial wellbeing offers a competitive differentiator for an employer in the war on talent – one with a financial return, a social conscience, and a human purpose.

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