Pandemic Reveals Overwhelming Need for Financial Wellness Programs

The need for employee financial wellness programs has increasingly gained attention in the past decade, and what began as general education initiatives have morphed into more actionable programs.

Offering a financial wellness program to employees was considered a value-added benefit, but the novel coronavirus pandemic suggests it is an urgent necessity.

“This outbreak has just shone a light on an existing problem: Too many people are already living paycheck to paycheck,” says Brian Hamilton, vice president at Smart Dollar. “American workers are up to their eyeballs in consumer debt. We’re spending more than we make. We have little to nothing saved, and we’re not putting money away for retirement. We will get through this, and when we do, everything must change.”

A just released survey from First National Bank of Omaha finds 59% of U.S. adults say they have experienced a loss of income as a result of the coronavirus, 45% report they are having trouble paying bills, and 52% report they do not have enough savings to cover three months with no income.

When asked about their current financial challenges, 41% report paying off necessary living expenses, 23% report paying off debt and 22% report saving for retirement.

Hamilton notes that studies have shown that as many as 78% of Americans are living paycheck to paycheck, and about 40% would not be able to cover a sudden $400 cost. In addition, 56% have less than $10,000 saved for retirement, and 36% have less than $1,000. “Nearly one-quarter, 24%, of the average household take-home pay goes towards paying off consumer debt,” Hamilton says.

Some argue that it makes no sense to put away money for retirement without first having your current financial house in order. Michael Barry, president of O3 Plan Advisory Services LLC, has discussed the math for why it makes sense to pay off debt before saving for retirement. He foresees a new model where financial wellness is implemented across a rich employee dataset exploiting the efficiency of artificial intelligence.

Hamilton says employer financial wellness programs should be covering the basics of what to do in an emergency and encouraging people to create an emergency savings fund. “Coronavirus is shedding a big light on how bad it was. Americans are not prepared to handle a financial emergency—let alone a pandemic.”

Asked whether participants should be putting money into an emergency savings fund while participating in their retirement plan, Nancy Hite, president and CEO of The Strategic Wealth Advisor, based in Boca Raton, said she strongly believes that creating an emergency savings fund that would cover six months’ worth of spending should be people’s first priority.

A survey by Hearts & Wallets finds that Americans’ No. 1 financial goal is to build out an emergency fund, with 45% listing this as their top priority. This jumps to 65% for those who reported in March that their work status is vulnerable. Almost two-thirds (63%) of consumers say they intend to spend less post-COVID-19, and the data finds home and car purchase and vacation goals have dropped on their list of priorities.

“The first thing that is going to happen to financial wellness programs following this pandemic is that they are going to focus on helping people to be holistically financially well,” says Laura Varas, CEO and founder of Hearts & Wallets. “This is a tipping point for us to shift away from consumption to being financially well. One of the most important things is having a liquid emergency fund. Financial wellness programs need to help people holistically with all of their financial goals—not just retirement. Programs that do not just favor retirement savings but that take a more holistic approach to all of their goals will better engage participants.”