Let’s not think about this from the sheer ‘feel good’ perspective. That’s obvious, too obvious!
Call me new-fashioned, I like to talk about "what-ifs."
What if we had a more Financially Intelligent workforce?
What would your business do differently?
What would shift if more employers moved in this direction?
How would the culture inside your business change?
How might this affect productivity? Retention?
First, let’s explore two statistics:
In 2019, Up to 74% of Americans live paycheck to paycheck, depending on who you ask and when you ask (per recent reports from both the American Payroll Association and the National Endowment for Financial Education.) It would be logical to expect to see this increase because of pandemic influence.
These are both significant facts to consider that are directly affecting employers.
What can an employee do to be productive if they are facing significant financial challenges?
Have you ever been really stressed out about money? I have - here's my story:
I was in my mid-twenties, working as a building manager for a apartment complex in Baltimore. It was a stressful job on a good day.
One weekend, I
got in a car accident. The other car merged into my car as he was changing lanes recklessly. Everyone was fine, but my car was wrecked! I had a big dent, a bent rim, and a lot of scratches that needed painting.
The insurance company battled me back and forth - I was sending a few emails a day to adjusters, claim coordinators, body shop managers and my bank. I lost countless hours of my work time in those weeks to managing this accident.
Then the bill came and I was at a loss for words, it was nearly $3,400.
Did I have $3,400 saved - fortunately, yes.
Did I want my savings to go to fixing a car that was hit by a reckless driver? Of course not.
Yet I was still frantic. I paced my office and felt ill at times. I felt all this pressure - as if I wanted to solve this problem that was looming over me, but had zero power to do so.
In short, it was paralyzing me and affected every aspect of my life.
I was stepping out of work. I was caught staring out the window, riddling myself over what steps to take. And I was trying to do all of this while being car-less, which if I hadn’t been a property manager of a high rise building, would have further exacerbated my ability to concentrate and be a meaningful employee.
And my situation pales in comparison to many day-to-day problems people face.
The stats say that most Americans live paycheck to paycheck, which means that when you stop the flow of cash, there’s an immediate rippling to future debts and ability to recover. A recent Bankrate Financial Security Index survey found that,
"Nearly four in 10 Americans (37 percent) would borrow money in some capacity if hit with an unexpected bill."
So Aaron - What does this have to do with work, employment, and improving the culture in my office?
There are three changes that could come from Financial Education in the workplace:
Reduced Credit Card Debt
Higher Home Ownership
Reduced Retirement Borrowing
I can’t say that these would change. However, I certainly would bet on the fact that it contributes to positive changes overall if workplaces, by majority, could enable this kind of education and reform. These changes could help towards reducing financial inequalities that are present and more obvious now than even 9 months ago.
We see a 67% reduction in financial stress of employees after going through our Financial Stability and Financial Wellness trainings and online programs.
Reduced Credit Card Debt
This isn’t about reducing debt by creating better debt management strategies. That’s for another conversation.
This is actually about helping your employees develop good money habits. The truth: Money habits are hard to develop. They take time.
Like every bad habit, it is often easy to start. You might not even notice the excuses you tell yourself to justify your actions - or inactions. Once it gets a hold of you it can seem impossible to change.
The power of financial education then, as people migrate into Financial Stability, is to help them develop the habits as they are making choices and discovering what money can do for them.
If you can imagine finally having access to cash, what some would consider disposable income (I absolutely despise this term), it’s then that guidance and education is most essential. Yet, we abstain from giving our newly minted adult employees access to the guidance they need most. These bad habits, whether they stem from spending to cover insecurities or spending for the rush of new ownership, all boil down to behavior.
Imagine if employers would help young adults understand interest, rolling balances, the real cost of the credit card loans, cash flow and the trap of overspending, credit limits, and more!
Wouldn't this make them even better employees?
This seems like a simple, and important way to correct some of the challenges that many face because of their inability to manage spending behaviors, many of which are enabled by the missing awareness of how credit cards work and the cost of using them.
Higher Home Ownership
Millennials are the first generation that is showing signs of financial underperformance compared to their parents, where most generations have offspring that surpass their own financial successes.
Home ownership for millennials is about 8% less than the 2 generations above them, in this report by urban.org. This does NOT include those that still live at home, which if accounted for would increase that percentage rather significantly.
This can come from a variety of challenges, preferences and happenings that have impacted millennials, including the 2008 stock market crash that happened early in most careers and the second crash in 2020’s pandemic experience. It’s mentioned that minorities face extra difficulties accessing homeownership, and, as that same report says, “where millennials live, the burden of education debt and rental costs, tight credit conditions, and limited affordable housing supply, as well as a shift in attitudes toward homeownership.”
Financial education, coming from the workplace, with options to learn about financial opportunities for wealth generation (or, let’s be honest - simply NET WORTH generation) like home ownership, could dramatically impact the lives of these individuals that work for your business.
At little cost to the employer, this may open the door to a more promising future for some of your team members, and ultimately craft your business into the vehicle by which financially successful lives are forged. It also can dramatically reduce someone’s monthly expenses, depending on where they feel they need to or are able to rent.
Is it guaranteed that someone would get educated at work and subsequently buy a home? Of course not! It may only represent one of the many things that are important to develop a healthy financial lifestyle.
However, home ownership is often considered to as one of the bedrocks to developing Financial Stability in the long term for the working class. Why pay $2,000 in rent every month when you could pay $1,500 and own your home?
Reduced Retirement Borrowing
According to SHRM, the Society for Human Resource Management, ⅓ of Americans draw loans on their 401k?
If you review that article, you’ll see that of the various reasons people borrow from their 401k, none are leveraged. They are all related to overcoming a financial challenge.
Maybe the data scientists didn’t think to ask if the money was being taken out to start a business, or to leverage a different investment vehicle. But it’s also likely that most wouldn’t know to do that or feel empowered to do so.
So then, could financial management acumen and education, potentially, reduce the number of times a person needs to draw on the balance, or reduce the number of people that draw on these retirement accounts?
If the early withdraw comes from struggle, and we could work with individuals to support and address them through the struggles, helping them to see other opportunities besides compromising their future, we may be able to help them avoid such a costly maneuver. Because we all know the story of $100 a month compounded over the years!
Perhaps this would be one way to see that our employees, who dedicate themselves to our businesses, keep their earnings moving towards their future and not their past.
Because rarely does money have purpose in our present.
Those that know me know I’m more visionary than scientist.
I’ll punch my card at idealist, thinker, or dreamer before I spend 9 hours researching. Luckily he has a team to help him [inserted by a member of that team].
The above is a dream that I think is worth considering.
If the world moved employers, and nudged them towards providing these educational elements as a benefit to their employees, we might start to see trends change, patterns in money adapt, and people create new lives.
This isn’t just white-collared, cubicle jobs. This is in startups, construction, trades, and more. While we continue to fight for schools to adopt these measures as well, anyone over the age of 18 has already missed that chance. Businesses can give them that second chance.
Because here’s the reality - a stressed, especially a financially stressed individual dealing with one of the above scenarios, is likely to be mentally checked out at the job anyway!
Many of us business owners want to see our people lead lives that grow, evolve, and become financially successful. It’s in mission statements and visions of what our business does. For now, it serves to consider that a key element of businesses is their people, more specifically your people.
What if together we could develop them as people, more than just as producers of our economic vehicles.
Aaron Velky is the CEO & Co-Founder of Ortus Academy
If you would like to know more about our Employee Financial Wellness Programs, visit: www.OrtusAcademy.com/b2b