Removing the Stigma Surrounding Debt Benefits
Debt is often a taboo topic, but it's essential to talk about it openly.
According to a recent study by Nerdwallet, the average American family has more than $155,000 in debt. When expenses arise unexpectedly, as they do two or more times a year for one-third of Americans, this can cause families a lot of stress.
With almost 70% of Americans lacking emergency savings, any unexpected expense can put families under enormous pressure. These situations typically amount to around $2,000 — two weeks of income for the median household. When forced to dip into savings on these occasions, 50% of American workers cannot rebuild them.
If they have no savings, employees are forced to make less than ideal choices, such as taking out payday loans, which often leads to a cycle of debt. This can affect mental health, work productivity, and job satisfaction, all of which invariably have repercussions for the employer.
For example, according to Financial Health Network's 2022 Employee Debt Report, 65% of employees reported that debt stress affects their physical health, while 50% spend at least an hour per week at work handling debt-related matters. Additionally, 39% missed at least one day of work in the last year due to debt-related stress or handling debt-related matters, and 29% reported that debt stress has affected their performance often or very often in the year.
The Importance of Breaking the Debt Stigma
It's clear that debt has a major impact on employees, and in turn on employers. However, instead of getting support, out of shame many employees feel they need to hide their debt from their employer.
Research from Salary Finance shows that only 13% of employees feel they can talk to their employers about their financial problems and get the help they need. When asked why, 20% stated that money wasn't something people talked about at work, and 13% said they didn't feel their employer cared, so there was no point in discussing it.
If employers can break the stigma around debt and create an open dialogue about finances, employees are more likely to trust their employer. Additionally, a company culture that is open and non-judgmental about debt can make it easier for employees to ask for help when they need it.
Providing Practical Solutions
A Consumer Affairs survey discovered that during the Great Resignation, 40% of employees who left their jobs did so because they wanted better benefits. In addition, according to Financial Health Network, 68% said they feel it's important for employers to offer debt-related financial wellness benefits, and 62% said they would be more likely to stay with a company that provided such benefits.
Employers who want to attract and retain the best talent should consider introducing financial wellness benefits that help employees get out of debt and improve their financial resilience. These programs can provide guidance on topics such as budgeting, credit management, and student loan repayment. Some employers also offer tools such as financial calculators, personalized advice, and access to financial counselors. More direct help can also be offered in the form of student loan repayment assistance, emergency savings accounts, and affordable credit that can be used to pay off high-interest debt.
Some of these benefits were included in the Financial Health Network survey, which revealed that a relatively low percentage of employees had access to them. For example, only 28% had emergency savings accounts that their employers made contributions to, while 66% who didn't have this benefit stated they would use it if they had it.
This is an opportunity for employers to differentiate themselves by offering these types of benefits, which can have a major impact on employees' financial wellbeing and, consequently, their job satisfaction, performance, and loyalty to the company.
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