Financial Wellness Programs Should Have Partnership At The Core

Addressing immediate financial needs alongside long-term planning

 

When employers talk about financial benefits packages, traditionally, the discussion gravitates toward a future state – money that can’t be liquidated quickly without penalty. They’ll offer to match employees’ contribution to a retirement fund or offer shares of stock that will deliver value down the road.

Those offerings are important, but today’s employees are just as interested in financial benefits that offer more immediate support. A PYMNTS survey conducted in April found that 69% of urbanites live paycheck to paycheck, as well as 63% of rural and 55% of suburban consumers. They’re turning to costlier avenues – including retirement savings withdrawals, payday loans, and buy-now, pay-later options – to keep their heads above water. Federal Reserve data from Q1 2023 showed credit card balances closing in on a trillion dollars. And with the Fed voting in July to raise interest rates another 0.25%, carrying those balances will soon become even more expensive.

Human resources (HR) professionals should be attuned to these challenges and ensure their financial benefits packages are just as helpful for employees trying to handle today’s financial concerns as they are with supporting planning for tomorrow’s finances. Of course, building a well-rounded financial wellness program requires resources that can’t always be gathered internally. As much as HR will work with an outside partner to set up and manage retirement accounts, more immediate money management support requires a network of partners that can offer solutions for your employees wherever they are on their financial journey.

Working together to support clients across 50 states in 14 different business categories, we have seen firsthand the benefits that arise from financial wellness programs built on strategic partnerships. Specifically, such programs provide three key benefits to employees: tools to manage unexpected or emergency expenses, resources to reduce costs across their spending categories, and support to tackle revolving debt head-on.

Tools to Manage Unexpected Expenses

Employees living paycheck-to-paycheck lack the resources to manage a costly, unforeseen crisis – for example, a critical appliance breaking down, a vehicle needing immediate repair, or a last-minute flight for an important family matter. If they’re unable to cover these expenses right away, their options are typically quite costly over time: they could put it on a credit card, take out a personal loan, or use a buy now, pay later platform with high-interest rates and stiff penalties for late payments. It’s easy to see how these solutions can ultimately trap users in a deeper cycle of debt.

Businesses often offer employees access to websites for items such as discounted theater or concert event tickets as a perk; however, HR can also partner with an outside provider to offer purchases to a wider range of products – electronics, appliances, travel – paid for overtime with a regular deduction from the employees’ paycheck. This option makes it easier to handle unexpected expenses without breaking the bank, sacrificing other debt payments, or impacting the employees’ credit scores.

Resources to Reduce Costs

Addressing financial difficulties requires more than a one-size-fits-all approach, as bills weighing an employee down might not primarily be loan payments or credit card debt. These more burdensome expenses could be for basic needs, like groceries and rent, childcare, elder care, rising heating and/or other utility costs, or even the need to save up for a down payment for better housing or a more reliable vehicle. With the federal student loan payment freeze lifting this fall, millions of Americans will face a returning monthly bill, likely in the hundreds of dollars, eating valuable budget space.

In a holistic financial wellness program, HR teams should look not only at their internal resources or resources at the federal level but at the state and local levels as well. With innovative technologies, a strategic partner can handle both the research and execution for HR, helping employees find and apply for non-profit and local governmental programs such as housing assistance, utilities relief, or more affordable childcare needs and education. It’s a simple way to help employees tap into resources they might not have known were available, and it allows them to refocus their monthly budget on paying down debt or building savings.

Support to Tackle Debt Head-On

For employees underwater with credit card debt and loan payments, turning to a credit repair business or debt negotiator may be a tempting option. However, the fees charged and damage to their credit report may have a long-lasting impact on an employee’s financial well-being. Additionally, the stress caused by excessive debt, unrelenting collection calls, and wage garnishment can keep employees from bringing their full selves to work.

Instead of leaving workers with little option but to turn to predatory debt relief companies, HR can work with strategic partners that provide an empowerment-based approach. An outside consultant can work one-on-one with employees to help them understand the rules for navigating the credit system and find ways to strategically pay down debt that has the greatest impact on their credit score. 

Alternatively, HR can provide employees with tech-driven, self-service solutions that prioritize employee privacy, deliver trusted financial resources, and meet employees’ needs with access to financial counseling and coaching programs.

Improving credit scores isn't just to have a high score on paper - it has real tangible benefits in people's everyday lives. Anecdotally, this allows individuals more options, better rates, and lower expenses.

When an employee is empowered to be free from debt, they have the means and opportunity to begin building a rainy-day fund, as well as to participate in longer-term retirement benefits offered through their employer. These changes are what allows families to not only procure generational wealth - but also maintain it. Ultimately, this promotes a culture that allows employees to truly thrive.  

Partnerships Across the Journey

Great 401k or IRA (individual retirement account) benefits can be very attractive for those with the means to contribute the maximum. However, centering financial wellness benefits around retirement alone ignores challenging financial realities for more than half of the American workforce that is focused on making ends meet today. 

HR has the ability to help employees overcome these rising debts and bills, build savings for unforeseen expenses, and then begin thinking about tomorrow. Creating a network of partnerships will allow businesses to achieve this more holistic approach to financial wellness, tapping credit counselors, fintech, and purchasing programs in the same way they tap investment firms to manage retirement benefits.

It's time HR teams align benefits with their employees’ complete financial wellness journeys. Building a network of partners to target specific challenges throughout the journey can be the first step. No one entity can do it all. Partnerships benefit each and every one of us.

	Rochelle Gorey is the Co-Founder & CEO of SpringFour, a Certified B Corporation and social impact FinTech company, which engages in connecting customers to financial health resources.
	Assad Lazarus is the Chief Client & Development Officer at Purchasing Power. He strives for the financial betterment of people.