Employee resilience, or ERT (employee resilience training) is growing more popular with today's employers.
Even before the pandemic hit, your employees were not financially secure. A recent study by the Global Financial Literacy Excellence Center (GFLEC) found that:
- One out of three families couldn't handle a financial life event
- 27 percent could not find the money for a $2,000 emergency
- 33 percent had difficulty making their ends meet month to month
In other words, American families are not financially resilient.
Employees that are not economically resilient do not meet the definition of financial wellness: having the knowledge, ability, and desire to make intelligent financial decisions, as well as having the capacity to live a happy life within one's means.
Unfortunately, those experiencing poor financial health often do not make the best employees.
Many studies over the years have shown that financial stress, one symptom of poor financial health, leads to poor work habits such as absenteeism, presenteeism, lack of engagement, poor peer relationships, on-the-job accidents, and more.
That's why it is in a company's best interest to help employees become financially resilient by offering a financial wellness program.
What is Financial Resilience?
Without financial resilience, your employees are unlikely to handle life events that impact their finances.
When something unexpected occurs, like unemployment, divorce, health issues, economic downturn, or, most recently, the COVID-19 pandemic, your employees do not have the knowledge, skills, or resources to adapt to the circumstances.
Financial resilience depends on three main factors:
- Financial resources
- Debt obligations
- Money management
For employees with low financial resilience, unexpected life events can throw them off balance financially. Those that are not prepared often make poor financial decisions in the wake of such an event.
For instance, they might:
- Fall behind on bills
- Make smaller payments on credit cards
- Borrow money using a payday loan
- Use a pawnshop to raise funds
- Neglect their long-term savings goals
Who is Affected?
Most people assume that those with a high income don't have to worry about financial resilience.
However, because economic resilience depends on more than just resources, those with a high income coupled with high debt and poor money management skills can be less resilient than someone with a lower income associated with lower debt and better money habits.
Generally speaking, however, those with higher resources tend to be more resilient because they have one of the three pillars covered.
The GFLEC study found that groups have lower financial resilience than others. These include:
- Women – Gender gap in pay leading to more debt
- Minorities – Persistent wealth gap with lower income levels
- Employees aged 30 to 44 – Higher debt-to-income ratio, often due to student loans,
- Less-educated employees – Those without a bachelor's degree have more debt and more cash flow issues
Additionally, all four of these population subgroups show a lack of financial knowledge and skills needed to make strong financial choices daily and during times of economic crisis.
Statistics from the study showed that only 15 percent to 22 percent could correctly answer three financial questions used to test the financial literacy of those in the vulnerable populations.
Of those not in vulnerable populations, between 31.5 percent and 49.4 percent could answer all three questions correctly.
5 Ways Financial Wellness Programs Can Help
Offering a holistic financial wellness program can help your employees become financially resilient.
A holistic financial wellness program meets the physical, emotional, mental, and spiritual needs of each employee regardless of their age, race, socioeconomic status, job description, or family makeup, including:
- Physical needs: Shelter, food
- Mental needs: Financial stress
- Emotional needs: Quality of life, interconnection of financial state and personal life
- Spiritual needs: Motivation, meaning, purpose, community
Here are five ways a holistic financial wellness program can help your employees achieve financial resilience.
1) Targeted Communication
With the evidence from the GFLEC study and others, it is easy to target vulnerable employee populations with financial wellness information that meets their needs.
If you use a platform like Enrich, this targeted communication can be even more personalized, allowing each employee to assess their current financial status and determine their next steps in becoming financially resilient.
2) Cash Flow Management
One of the key considerations for determining financial resilience is whether an employee wisely uses the financial resources to meet their monthly obligations. A financial wellness program can help by teaching employees about budgeting.
Enrich has educational courses like:
- Creating a Budget (And Sticking to It)
- Creating a Financial Plan for Your Priorities and Goals
- Maximizing Your Earning Potential and Developing Your Career
- Understanding Your Paycheck and W2
3) Debt Management
Another resiliency issue is debt and how debt is managed.
Financial wellness programs can teach employees about using debt wisely and provide strategies for getting out of debt, even on a limited income.
In addition to courses on debt management, Enrich offers tools to help your employees learn better debt management practices, including:
- Student loan snapshot
- Credit card paydown tool
- Debt-to-Income ratio tool
- Loan consolidation tool
- Loan payments calculator
4) Increasing Risk Protection
Many people with low financial resilience also have no insurance policies to protect them in emergencies.
A holistic financial wellness program can help employees understand the insurance benefits you offer and make the most of these benefits.
This includes medical insurance and life insurance, disability insurance, accident insurance, and more.
5) Increasing Savings
Finally, those with financial resilience can handle small financial crises without turning to high-interest or risky loans.
Additionally, individuals plan for the future by saving for long-term goals such as a home, education, and retirement.
A financial wellness program such as Enrich can teach your employees about:
- Different types of savings: Emergency, short-term, long-term, retirement
- The value of saving early for retirement
- Your company's retirement benefit
Having financially resilient employees is a win-win proposition. Your employees become financially healthy and live their lives to the fullest without fear and anxiety over money issues.
Your company experiences a boost in the bottom line because your employees are more productive, engaged, and loyal.