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Anyone else ready for some precedented times? ✋
As we close the first quarter of 2023, each passing month unlocks a new economic and social challenge. Rising inflation. Housing crisis. Student loan debates. Bank insecurity. Some sort of brain-eating fungus? Oh sorry, that last one was HBO’s The Last of Us. Or was it? You get the picture—it’s a wild ride to be adulting in 2023.
If you’re an executive or leader in your organization, it’s easy to forget in the midst of meetings, revenue targets, budgets, or whatever else fills your day that every single one of our employees represents a household that’s also grappling with the mental and financial challenges of 2023. And as whole, complex people, employees can’t simply check those stressors at the office door or the “Join” button of a Zoom meeting. Simply put, your employees’ financial strains are your business’ productivity drains.
As the modern workplace has evolved over the last 20 years (especially post-COVID lockdown) it has increasingly become table stakes for employers to invest in the wellbeing of their employees. This includes monetary and non-monetary benefits that extend beyond standard compensation, health, and retirement packages. As you consider building out a wellness program or total rewards framework, don’t forget that financial wellness programs for employees are an essential component of a comprehensive employee benefit plan.
Why is financial wellness important for employees to spend time thinking about?
Finances are a MASSIVE component of household and personal stress, with one survey from Capital One revealing that 73% of Americans rank finances as their NUMBER ONE stressor. And at work, employee financial stress can lead to absenteeism, decreased productivity, lack of retirement ability, and even health issues. By investing in financial wellness in the workplace, employers can address these challenges and help employees achieve better financial stability, leading to a healthier and more productive workforce. The unique alchemy of 2023 makes this the year for organizations to prioritize a financial wellness program—or feel the downstream negative impacts later.
Here are the 5 macroeconomic factors impacting every organization that makes 2023 the year for employee financial wellness:
1. High inflation and interest rates
Inflation has household budgets (or lack thereof) increasingly strapped for cash on everyday expenses. And the byproduct of system-wide inflation is a rise in interest rates. This means that big ticket purchases like housing and transportation, done without intentionality, can have DRAMATIC impacts on a household's long-run net worth and financial stress. In short—there’s additional pressure on the everyday lives and habits of employees, and employers that see that and do something about it will have meaningful advantages in recruitment and retention.
2. Recovering from bad money habits post-COVID
Most of us can remember exactly where we were in mid-March, 2020 when the world began to lock down (I was in my in-laws kitchen, for the record). It was a scary time, and what do we do when we’re scared? We save. 2020 was a great financial year for many who stopped traveling, eating out, etc., and started socking away more cash in our sock drawers. In 2021 and 2022, we saw government stimulus hit our bank accounts, the world opened up, and overspending was rampant. In 2023, many households still haven’t level-set their spending, leading to…
3. Growing 401k loan and credit card balances
Data in the early part of 2023 shows that employees are pulling cash out of their 401ks and racking up credit balances in record numbers. This is happening because of financial stress, which will only compound over time as they continue robbing future Ben to pay Ben today. Rather than simply permitting 401K loans (which should be a red flag to you of employee financial struggles), employers should consider helping employees solve the root issue—financial unhealth.
4. Ambiguity about student loan payments
Student loan repayments have been paused for the last few years—and there’s been frequent discussion in the news about when payments will restart, if loans will be wholly forgiven, and what the Supreme Court will decide the President has the authority to do in these situations. Two things are for sure; first, there’s a lot of misinformation and lack of understanding about student loans, and second, they will likely become unpaused in the not-so-distant future. This will place even more stress on household finances. (That’s why we at YML spend a TON of time and effort helping people understand and strategize about their student loans—especially those who qualify for the uber-confusing public service loan forgiveness program.)
5. High talent mobility in the world of remote work
As many offices reopened and companies recalibrated expectations after COVID, remote work has reached new heights of acceptability. That means that for many roles, candidates now have a nationwide pool of possible companies to work at—and local labor markets are feeling the pressure. Many employees have realized that changing jobs can lead to greater comp and benefits, and companies who aren’t investing in intentional and tangible strategies to retain their people will find themselves hemorrhaging top talent.
Put those five macroeconomic forces together, and the world of employees in 2023 is ripe for financial unhealth. The downstream impact is that businesses will feel that pain. By implementing a financial wellness program for employees, businesses can strategically invest in the long-run financial health of their people—yielding greater productivity, loyalty, and goodwill, not to mention a meaningful impact on the lives of your team and their families.
2023 might continue to feel a little wild. But show me an employer paying attention to their people's real, human, financial needs and stresses, and I’ll bet you’ll find more employees able to thrive at home AND work. That’s a win for the business, for the employees, and for their families.
Now that’s what I call unprecedented.
P.S. We know there are lots of different financial wellness tools in the world—click here to see a few financial wellness examples from our clients and how we’re helping their team stress less about money!
