Learning to manage money was a required field of study in my childhood home. On the first day of the month, my father would sit at the dining room table to balance his checkbook and pay the household bills. My four siblings and I knew what would happen if we passed by while he was in that area. We would have a course on financial responsibility. I learned four valuable lessons that many adults, especially those in the black and brown community, were unaware of.
First, pay yourself first. Before you spend anything, set aside some savings. The amount can change but the act must be routine. Second, never live beyond your means. If you can’t afford it, you don’t need it. Third, your ability to repay a loan is a bigger asset than what you earn. And finally, more money does not solve money problems. If you can’t responsibly manage a $100 budget, you won’t be good with $100,000 either.
My father prepared his children to navigate a world of work very different from that of his generation. Today, most workers no longer work at jobs that provide a pension. Instead, it is more up to individuals to save for retirement by contributing to 401k or other retirement accounts. People are also jumping from job to job more often and are therefore faced with financial choices at every turn. What else, a quarter or more of today’s workforce works in the gig economy, which offers even fewer workplace-managed financial benefits.
All in all, the burden of financial well-being has gradually shifted from the employer to the individual, but I see signs of a small pendulum swing in the other direction. Given the current talent shortage, the challenges of COVID-19, and the multitude of online financial wellness tools and products, businesses are able to focus more on the financial wellbeing of employees, which is highly 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, PwC to research shows.
I see three areas that employers are focusing on to ensure better financial well-being for workers. They are:
This year, Equal Pay Day in the United States is March 15. It highlights how hard a woman has to work, on average, to earn what a man did in the previous year, given 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 1% disparity between what women and men earn globally at Ceridian, and less than 1% disparity between what white and non-white employees win in the United States. employees worldwide, our company will conduct another analysis in the second half of 2022.
It’s no surprise that gender and racial inequalities continue to plague our society. The systemic barriers in place faced by women and people of color will take decades to break down. As President Joe Biden noted in a proclamation regarding Equal Pay Day, over a career, the pay gap can represent hundreds of thousands of dollars in lost earnings, especially for women of color, which has a significant impact on retirement savings and weighs uniquely on households headed by single mothers.
Employers of all sizes must work to close these gaps and keep them closed, so that all workers have the fairest chance possible to improve their financial well-being.
That’s what my dad was talking about when he said my ability to repay a loan was a great asset. But not everyone has the same access to credit. Historically, minorities have disproportionately faced exclusionary behaviors and systemic barriers that have contributed to economic disparities, including limited access to federal mortgage programs and geographic restrictions on physical banking locations. While 5.4% of U.S. households were unbanked in 2019, nearly 14% of black households and 12% of Hispanic households were unbanked, government data shows. Without immediate access to traditional lines of credit, these groups are more likely to use high-interest payday loans.
Pay-as-you-go, or access to earned wages, is an emerging benefit increasingly embraced by employers allowing workers to access earned wages when they need it most. Four in five (83%) American workers aged 18-44 think they should have access to their earned wages at the end of each workday/shift, before the traditional payday, to research of my work shows. Mizuho Securities United States speculated that pay-as-you-go could be both the biggest change in the payroll industry since the 1960s and a disruptor for the $11 billion payday loan market.
Companies have a fiduciary responsibility to provide financial education to their employees. They have the people to manage business results and the means to help employees manage their results. Money problems are only solved with education, dedication and an implemented plan. Companies that meet this need will find student volunteers among the workforce. 87% of employees want help with their personal finances, PwC notes.
My dad taught financial wellness classes because he cared about his kids. In any organization, people are the most important asset. We trust our employees to serve our customers, promote our brands and grow our business. The healthier they are, the more present they will be at work and outside of it.