According to a report from the Federal Reserve Bank of New York, Americans added $333 billion of aggregate household debt in quarter four of 2021—that’s a sharper increase than at any time in the last 14 years and brings the national total to $15.58 trillion.
If reading that makes you want to close all your tabs and crawl into bed, you’re not alone. A 2021 survey from SHRM and Morgan Stanley at Work on the financial well-being of Americans found that monetary stressors and mental health are, for many respondents, linked. As of June, nearly a third of working Americans surveyed reported that during the pandemic they experienced finance-related anxiety and almost 20% reported experiencing finance-related depression. The numbers are higher for those who are unemployed.
Yet, even as companies invest in mental health benefits such as teletherapy and employee assistance programs, fewer have reportedly made similar investments in financial well-being programs. According to the same SHRM/Morgan Stanley report, only one in four HR professionals surveyed said their organization had added or expanded existing financial well-being benefits to “help employees manage their financial stress since the start of the Covid pandemic.”
The SHRM/Morgan Stanley report suggests corporations that adopt such benefits could have a recruiting advantage: Their data suggests unemployed Americans “tend to value financial wellness benefits more than working Americans,” and could view such benefits as “welcome incentives” when choosing a workplace.
One company that’s banking on this prospect is Northwell Health, New York State’s largest health care provider. Diana Witkowski-Grubard, the company’s director of HR, told CNBC that they introduced financial well-being benefits last year, including financial planning, as both a recruitment tool and as a mental-health boost for current employees.
“Think about how you feel when you’re financially stressed and how that leads to anxiety, depression, weight gain, and underlying medical conditions, which leads to increased absenteeism and less productivity,” Grubard said to CNBC.
In her view, offering financial benefits helps workers be their best on the job.
“Our consistent long-term focus on well-being allows us to differentiate ourselves in this environment,” Grubard told CNBC. “It is what we use to attract and retain our talent.”
Some introductions are in order. David Fairburn, an associate partner in Aon’s retirement solutions practice, told HR Brew that financial well-being benefits tend to fall under what he calls the four Ps: “prepare, plan, protect, preserve.”
“Prepare, plan, protect, [and] preserve,” Fairburn described. “Prepare” benefits, according to Fairburn, covers short-term benefits like budgeting, creating an emergency fund, or assisting with student loan payment. “Plan” benefits are long-term financial offerings, such as retirement plans. “Protect” benefits is about “protecting the assets you already have,” through insurance coverages like life insurance. The final area, “preserve” benefits, endeavors to help make an employee’s assets last a lifetime—through advocating for products like lifetime income benefit riders.
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When defined this way, Fairburn said that “almost every benefit employers offer hit somebody’s finances in some way,” but he notes that the bucket getting the most attention recently is the “prepare” bucket, in part, he says, because “pressing” financial needs can mean employees are less able to plan for the future.
“A lot of employers are looking at those ‘prepare’ types of benefits in order to meet employees where they are,” Fairburn explained. “Sometimes it’s hard to think about saving for retirement when you have more pressing short-term needs like paying off a student loan, or dealing with credit-card debt, or starting an emergency fund.”
Ana Mahony, founder and CEO of Addition Wealth, a financial wellness platform, echoed the need for employers to offer financial planning benefits.
She said the changing nature of compensation and benefits over the past few decades, including the shift away from defined-benefit pension plans toward defined-contribution plans and the emergence of new income streams, like “side hustles,” has created complex financial realities that are, at times, difficult for workers to navigate.
“You’re seeing a lot of responsibility on the individual to make financial decisions, whether it be fully understanding their pay and benefits and budgeting or thinking through what is the best way to plan for their future themselves,” Mahoney explained. “We’re living in a world with a lot of sophisticated trade-offs…We don’t grow up, necessarily, in a world where we’re being taught how to work through all of these decisions.”
Vendors venture in. VC firms have taken notice. In recent years, venture-capital money has flooded in to fund financial well-being startups to the tune of $5.6 million to HoneyBee, "a startup that aims to help companies provide access to financial support to their employees,” and $7.3 million to Northstar, a startup that works with employers to offer “financial wellness as a benefit.”
Julie Scotland, the co-founder and chief growth officer of Pasito, a fintech company that specializes in helping employees understand pre-tax allocation options, says tech solutions can offer personalized solutions to the complexities Mahoney described.
“What’s really unique about this point in time is that there’s five different generations in the workforce. And what’s really hard for employers is to figure out [is that] every single person wants something different. And how do you cater to each of them?” Scotland explained. “How do you do that hyper-personalization, without investing in hundreds of vendors that are going to apply from your veterans and baby boomers all the way down to your Gen Z?”—SV
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