By Timothy Flacke, Executive Director, Commonwealth
In recent years, there’s been a lot of talk in the popular media and financial services industry press about the benefits of financial security, financial wellness, and financial health on worker productivity and effectiveness.
“When your workers are better off financially, they’re better workers, too.” Say this to a room full of people, and they’ll nod in agreement.
It’s easy and intuitive to see less stress as beneficial, but if you’ve never been in the position of living paycheck to paycheck, it may be tough to really understand how employee financial stress impacts your company’s bottom line. After all, who can’t relate to financial worries? But when we talk about the bottom line benefits of financial security, we’re not talking about fleeting worries or concerns. We’re talking about the kind of chronic, toxic stress that keeps you up at night. It’s the what if’s that can be, frankly, terrifying. What if I can’t make rent? What if there’s no affordable generic version of my heart medicine? What if I have to say no when my daughter wants to go on the traveling soccer team?
This is the stress that makes you late to work, distracts you while serving customers, and makes you snap at a colleague–a constant, persistent and pervasive intrusion on your ability to be productive.
With all the practical, social, and emotional implications of being unable to pay their bills, it’s inevitable that this takes prime position in many workers’ minds, crowding out all other considerations.
In fact, research has shown time and again that workers who are financially insecure and stressed are also less productive and more prone to issues at work. Take, for example, a study by Jirs Meuris and Carrie Leana, who asked more than a thousand short-haul truck drivers about their financial resources, and then tracked drivers’ accident histories over the following eight months. The study found that financial anxiety burdened drivers’ cognitive resources to the point of producing a marked increase in their risk of preventable accidents.¹
Most workers are not truck drivers, for whom these mistakes can be grave. But the lesson remains: workers who are financially secure reap not only personal benefits, but provide benefits for their employers. Research consistently shows that day-to-day financial issues and worries are the top financial concern for hourly workers. In this context, it’s much easier to see how addressing your employees’ most pressing financial needs by providing them with the tools and opportunities to build liquid, emergency savings leads to business value.
Even having a few hundred extra dollars on hand in case of an unexpected expense can provide an emotional and financial safety net that would mean the world to your workers.
Recent research from Commonwealth found that having savings was directly correlated with being less worried. Specifically, employees with more than $400 in savings had fewer financial concerns than those with less than $400. They also tended to worry the least about everyday expenses and were more likely to allocate their raises to short- and long-term savings.
Taking care of employees’ needs as a business case isn’t new for employers. Consider one of the most commonplace benefits in the American workplace: employer-sponsored health plans. They’re so ubiquitous that it can be quite easy to lose track of what role they play in driving business results. We often speak of benefits as a matter of social responsibility, but as a practical fact, they’re so popular among employers because they also play a critical part in an organization’s success. Access to healthcare is necessary for workers to be physically healthy, and in turn, to be fully and consistently present, productive, and able to provide top quality customer service.
Fortunately, there are simple steps forward-looking employers can take to enable their workers to manage this day-to-day financial anxiety–solutions that are far more simple and inexpensive than tackling healthcare or retirement. Mundane as it sounds, simply having an easy, convenient way to build and draw down on liquid savings is a proven, powerful tool for employees to help manage financial volatility. People need a place to “stash” the minor windfalls – the 5 payday months, the weeks with overtime, the tax refunds – and then tap them when the inevitable droughts arrive.
The payoff for employees and employers alike can be enormous, both in costs saved (for short term lending, overdraft fees, utility disconnects, etc.), lower anxiety and stress, and better use of precious social capital.
Over nearly two decades of work, we’ve consistently found that people value and want to save; the challenge is making that simple, easy, and appealing. Despite a smorgasboard of financial products, it’s surprisingly difficult to find a safe, easy tool to store small amounts of cash, easily retrieved when a need arises.
Many hourly workers simply do not have good small dollar savings solutions. In a recent Commonwealth study, we found that 36 percent of workers making under $60,000 did not have a savings account–and the lower their income, the higher that percentage creeps up. Improving access to savings is a necessary first step towards improving the likelihood of savings among lower income individuals.
Employers have a powerful opportunity to address this unmet need, reduce toxic worker financial anxiety, produce benefits for the firm and worker alike, and share in the rewards of their employees’ increased financial security.
About BlackRock Emergency Savings Initiative
BlackRock has announced a $50 million philanthropic commitment to help address the savings crisis. For the first phase, Commonwealth, along with our fellow industry leaders Financial Health Network (formerly CFSI) and Common Cents Lab, will be working together on BlackRock’s Emergency Savings Initiative to fuel innovation that will allow millions of Americans living on low- to moderate-incomes to establish a stronger financial safety net.
To find out more about the Blackrock Emergency Savings initiative and how your organization can help your employees increase their financial security, contact Nick Maynard at info@buildcommonwealth.org.
Commonwealth strengthens the financial opportunity and security of financially vulnerable people by discovering ideas, piloting solutions and driving innovations to scale. Our work has enabled 750,000 Americans to save over $2 billion. We collaborate with consumers, employers, the financial services industry, policy makers, fintechs, and mission-driven organizations to build solutions that make people financially secure.