Financial wellness isn’t just something nice to have. It’s as essential as a life preserver at sea. When a ship is sinking, you need something seaworthy to hang on to. But imagine if a prankster had filled the boat with fake floats or lead-filled lifejackets! All the passengers would be screaming for the captain and scrambling to find a real solution!
Financial wellness is exactly the same. If it’s real, it can see your employees through hard times and carry them to better places. The trouble is sorting through the fakers and finding a solution that actually works.
The Tough Truth About the American Worker’s Finances
Not everything billing itself as financial wellness actually helps employees move toward a happier place with their money. In fact, there are plenty of myths and misconceptions out there about what counts as real financial wellness.
One of the biggest misconceptions in financial wellness is that employees are just a few minor adjustments away from real financial security. In other words, the problem’s not that bad. Some businesses think, Everything’s mostly fine! All my team needs is a minor tweak. Yeah, right! The reality in America is that most employees are in a very bad place financially.
- 40% can’t cover a $400 emergency.1
- 78% are living paycheck to paycheck.2
- 40% of student loan borrowers are at risk of defaulting on their loans by 2023.3
That’s the situation for most employees today—and it’s not a pretty picture. To be clear, the trouble isn’t sealed off at home. This stress follows them to work every day, weighing them down like a backpack full of sand.
But for a growing number, things are looking up. Many are gaining real financial wellness. And your company deserves to join them! To make sure that happens, let’s identify a few of the myths that too often stop it from happening.
Myth 1: Offering student loan refinancing will solve employees’ struggles.
Truth: Debt is only one piece of a far larger financial puzzle.
About a third of employers either already use or plan to offer some form of student loan refinancing, consolidation or employer match toward repayment.4 While helping workers to pay off debt as an incentive is great (because it actually helps), refinancing often harms financial wellness. Why? Because it can create a false sense of progress where none is actually happening. Refinancing or consolidating is just moving the debt without solving it. Sure, it reduces monthly payments, but it also extends the life of the debt! Employees end up paying way more in the long run. Meanwhile, these approaches can also lead employers to think they’ve plugged the hole in their employees’ financial boat. In reality they’re only bailing a little water as more keeps pouring in. Debt is only one piece of the financial puzzle employees are working on, and they need a more comprehensive solution.
Myth 2: To stop living paycheck to paycheck, employees need payday advances.
Truth: Financial wellness is less about payday and more about behavior change.
This mythical view of financial wellness is getting pretty popular in the retail and hospitality spaces. It’s understandable in a way. Employers who offer advances point out that it protects their employees from going to a loan shark, who would charge them outrageous interest. And having early pay access is better than getting killed on interest from a predatory lender. However, it doesn’t fix the problem of living on the edge—it only shifts the trouble to the real payday when workers find a paycheck that’s too small to cover their expenses. Early pay is a little like giving in to the crying toddler who just wants a few more minutes of TV before bed. For employers who offer such services, turnover remains high. These advances do nothing to employees’ core view of money—they just tinker with the timing of payday as problems mount.
Myth 3: Automatic programs and payroll deductions can fix what’s wrong.
Truth: These measures are nice, but they don’t inspire much financial ownership.
We’d all love it if we could set it and forget it in every area of life. And while it might work well for some things, like your keto-friendly meal subscription service, it’s a disaster in others. Financial wellness is one area where it’s a big, fat bust! We call it the “auto my life” mentality. It shows up everywhere in the benefits space, but whether it’s micro-investing, employee purchase programs or auto-bill pay, these approaches fail because employees feel no ownership or intentionality. For example, if the payment is deducted from employees’ checks, they never experience the power of taking action with their money. Instead of helping workers auto their lives, let’s help them become pro-active with healthy habits that produce big results.
Myth 4: Employers can trust big financial institutions' programs to provide real financial wellness.
Truth: They’re usually capitalizing off of employees.
As everyone knows, every financial institution worth its salt is on a mission to make its shareholders money. And there’s nothing wrong with that profit motive in itself! But it should be kept in mind whenever your business encounters the marketing machine in the context of financial wellness. Lately it’s become a big marketing move for banks to offer a financial wellness product, which they advertise as a free or deeply discounted service.
The question becomes, what’s in it for them? It often turns out they’re only paying lip service to wellness as a way to get their financial products in front of your employees. Those mixed motives are bad enough. What’s worse is that what’s offered is often harmful to financial wellness—stuff like credit cards, emergency loans, refinancing offers and employee purchase programs! It’s the kind of bait and switch no one deserves, least of all your employees. Resist the convenience of ad campaigns dressed up as financial wellness and find a program that will never, ever include solicitations.
How SmartDollar Defines Financial Wellness
At SmartDollar we’ve heard all kinds of definitions of financial wellness, and you probably have too. But real wellness can only come from one source: behavior change leading to healthy personal money habits.
Wait, that’s it?
Yes, that’s it! It’s really that simple . . . in theory! But putting it into practice can feel hard as employees get started. The challenge for employers is to find a way of helping employees leave behind the bad habits like reckless debt and endless spending, and replacing them with healthy ones like budgeting, paying off debt, and investing and saving for the future.
Feeling the need for some encouragement? We’ve got some! In working with millions of employees in thousands of companies, we’ve seen story after story of people who pulled it off! Both individuals and teams are experiencing the feeling of no more payments. That means paid-off student loans, closed-down credit cards, paid-for houses and a hopeful outlook for the future.
True financial wellness is more than just checking a box on an HR to-do list. When it’s really happening, financial wellness means getting to the root of your employees’ money problems to teach and inspire actual behavior change for a lifetime. And real wellness doesn’t stop at the surface of the issue. A real solution helps the employee dig in and see the whole underlying problem.
Financial Wellness That Actually Works
SmartDollar stands alone as the financial wellness solution that actually helps employees take control of their money once and for all. We understand the symptoms of bad financial wellness like paycheck living, low morale at work and high turnover. But more importantly, we know and treat the root cause of the symptoms: bad financial behaviors.
Our Proven Plan
We’ve helped millions of employees in thousands of companies just like yours to turn the corner financially. We provide the tools and content to motivate workers to swap the bad habits for the good. Our approach is holistic, which means everything we teach is based on a complete understanding of the employee’s life, from their emotions all the way to their daily practices.
No matter which stage of financial wellness employees are in as they start out, SmartDollar has a matching financial action step and tool to help them complete it. Budgeting, emergency savings, debt payoff and retirement planning—each of these needs has its own asset that’s easy to use and apply.
The Top Names In Money
As workers begin their SmartDollar experience, they meet the top names in money, who will walk with them every step of the way. These experts have both the information and the experience employees need in order to understand not only which steps to take but also the reasons behind taking them. And the powerful stories of life change in the program inspire employees to change their whole lives around healthy money goals.
Real Results? Here’s Your Proof
Phony financial wellness products are everywhere. But the only thing you and your employees need is the solution that actually works. How do we know SmartDollar works? For one thing, we hear about it from employees who go out of their way to tell us. We’ve even met users who took time to drive across the country to visit our offices and share their success stories! Let’s see refinancing options or payday advances inspire that kind of enthusiasm!
But it’s the actual numbers we hear about from employees that truly confirm how much financial wellness is happening. The average user enjoys a $16,200 financial turnaround within a year of starting! That’s an average of $10,000 in debt paid off and $6,200 in savings! No financial wellness package anywhere can touch those numbers.
The average user enjoys a $16,200 financial turnaround within a year of starting! That’s an average of $10,000 in debt paid off and $6,200 in savings!
And consider how it helps your organization overall:
- Decreased wage garnishments
- Increased participation in voluntary benefits
- Increased average contributions
- Decreased 401(k) loans
Want to learn more about how to deliver real financial wellness to your people? Of course you do! Get the Financial Wellness Toolkit today!