Learning how to manage money was a compulsory subject in my childhood home. On the first day of the month, my father sat at the dinner table balancing his checkbook and paying the household bills. My four siblings and I knew what would happen if we walked by while he was in that zone. We would get a lecture on financial responsibility. I retained four valuable lessons that many adults, particularly in the black and brown community, were not privy to.
First pay yourself first. Before you spend anything, set savings aside. The amount may change, but the act must be routine. Second, never live beyond your means. If you can’t afford to pay for it, you don’t need it. Third, your ability to repay a loan is a greater asset than what you earn. Finally, more money doesn’t solve money problems. If you can’t responsibly manage a $100 budget, you won’t do well with $100,000 either.
My father prepared his children to find their way in a very different work environment than that experienced by his generation. Today, most workers no longer work in pension-earning jobs. Instead, it’s more up to the individual to save for retirement by paying into 401ks or other retirement accounts. People also hop from job to job more often and are therefore faced with financial decisions at every point. Additionally, a quarter or more of today’s workforce is in the “gig” economy, which offers even fewer workplace-managed financial benefits.
All in all, the burden of financial well-being has steadily shifted from the employer to the individual, but I see signs of a small shift of the pendulum back the other way. With today’s talent shortage, the challenges of COVID-19, and a plethora of online financial wellbeing tools and products, organizations are able to increase their focus on the financial wellbeing of their employees, which is much desired. More than half of employees say they would be attracted to a company that cares about financial well-being compared to their current employer, a PwC study shows.
I see three areas employers are focusing on to ensure better employee financial well-being. They are:
This year, Equal Pay Day in the US fell on March 15th. It shows how far into a new year a woman has to work, on average, to earn what a man did the previous year in similar jobs with similar skills and experience. Many companies are working to close this gap – and keep it closed. For example, my company’s 2021 review found less than a 1 percent difference between what women and men earn globally at Ceridian, and a less than 1 percent difference between what white and non-white employees make in the U.S. employees worldwide will be ours companies to conduct further analysis in the second half of 2022.
It’s no surprise that gender and racial differences continue to plague our society. It will take decades to break down the existing systemic barriers that women and people of color face. As President Joe Biden noted in an Equal Pay Day proclamation, the pay gap over the course of a career can add up to hundreds of thousands of dollars in lost income, particularly for women of color, with a significant impact on retirement savings and a unique burden on households that are run by single mothers.
Employers of all sizes must work to close and keep these gaps closed so that all workers have the fairest opportunity to improve their financial well-being.
That’s what my father was talking about when he said my ability to pay off a loan was a big advantage. But not all people have the same access to credit. Historically, minorities have disproportionately faced exclusionary behaviors and systemic barriers that have contributed to economic inequalities, including restricted access to government mortgage loan programs and geographic restrictions on physical bank locations. While 5.4 percent of U.S. households were unbanked in 2019, nearly 14 percent of black households and 12 percent of Hispanic households were unbanked, government data shows. Without direct access to traditional lines of credit, these groups are more likely to take advantage of high-interest payday loans.
Wage on demand, or access to earned wages, is an emerging benefit that is increasingly being used by employers to give workers access to earned wages when they need it most. Four in five US workers (83 percent) between the ages of 18 and 44 believe they should have access to their earned wages at the end of each workday/shift, before the traditional payday, research at my workplace shows. Mizuho Securities USA speculated that on-demand payments could represent both the biggest change in the payroll industry since the 1960s and a disruption to the $11 billion payday loan market.
Businesses have a fiduciary responsibility to provide financial education to their employees. You have the people to manage the company’s bottom line and the resources to help employees manage their bottom line as well. Money problems are only solved with education, dedication and a plan in place. Companies that fill this need will find willing students among the workforce. A full 87 percent of employees would like help with their personal finances, PwC found.
My father taught financial wellbeing because he cared for his children. In any organization, people are the most important asset. We trust our people to serve our customers, advance our brands and grow our business. The healthier they are, the more present they are at and outside of work.