Learning how to manage money was a compulsory subject in my childhood home. The first day of the month, my father sat at the dinner table filling out 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 were going to have a lecture on financial responsibility. I retained four valuable lessons that many adults, especially those in the black and brown community, were unaware of.
Pay yourself first. Set aside savings before you spend anything. The amount can change, but the action 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 greater asset than what you earn. And finally, more money doesn’t solve money problems. If you can’t responsibly manage a $100 budget, you won’t be fine with $100,000 either.
My father was preparing his children to navigate a very different work world than his generation had experienced. Today, most employees no longer work in jobs that provide retirement benefits. Instead, it is more up to individuals to save for retirement by contributing to 401ks or other retirement accounts. People are also more likely to hop from job to job and thus face financial choices at any time. In addition, a quarter or more of the current workforce is in the “gig” economy, which offers even fewer financial benefits managed by the workplace.
All in all, the burden of financial well-being has steadily shifted from employer to individual, but I’m seeing signs of a small pendulum swing the other way. Given the current talent shortage, the challenges of COVID-19 and a wealth of online financial wellness tools and products, companies are in a position to focus more on the financial wellbeing of employees, which is highly desirable. More than half of employees say they would be attracted to a company that values financial well-being compared to their current employer, according to research from PwC.
I see three areas that employers are focusing on to improve employee financial well-being. They are:
This year, Equal Pay Day fell on March 15 in the US. It shows how far a woman has to work on average in the new year to earn what a man did in the previous year, given comparable jobs with similar skills and experience. Many companies are working to close this gap – and keep it closed. For example, my company’s 2021 assessment revealed less than a 1 percent difference between what women and men earn globally at Ceridian, and less than 1 percent difference between what white and non-white employees earn in the US. global employees, our company will conduct a new analysis in the second half of 2022.
It’s no surprise that gender and racial inequalities continue to plague our society. It will take decades to break down the systemic barriers faced by women and people of color. As President Joe Biden noted in a proclamation on Equal Pay Day, the pay gap can add up to hundreds of thousands of dollars in lost income over the course of a career, especially for women of color, significantly impacting retirement savings and posing a unique tax. households run by single mothers.
Employers of all sizes must work to plug these gaps and keep them closed so that all employees have the fairest opportunity to improve their financial well-being.
This is what my father talked about when he said my ability to repay a loan was a great asset. But not all people have equal access to credit. Historically, minorities have been disproportionately faced with exclusionary behavior and systemic barriers that have contributed to economic inequalities, including limited access to federal mortgage loan programs and geographic restrictions on physical bank locations. While 5.4 percent of U.S. households did not have a bank account in 2019, nearly 14 percent of Black households and 12 percent of Hispanic households did not have a bank, government data shows. Without easy access to traditional lines of credit, these groups are more likely to use high-interest payday loans.
Pay on-demand, or access to earnings, is an emerging benefit increasingly embraced by employers, giving employees access to earnings when they need it most. Four in five U.S. workers (83 percent) ages 18-44 believe they should have access to their earnings at the end of each workday/shift, before the traditional payday, according to research at my workplace. Mizuho Securities USA speculated that on-demand payments could be both the biggest change in the payroll industry since the 1960s and a disruption in the $11 billion payday loan market.
Companies have a fiduciary responsibility to provide financial education to their employees. They have the people to manage the bottom line and the resources to help employees manage their bottom line. Money problems are solved only with education, dedication and a plan in motion. Companies that meet this need will find willing students among the workforce. A whopping 87 percent of employees want help with personal finances, notes PwC.
My father taught financial well-being because he cared about his children. People are the most important capital in any organization. We entrust our employees to serve our customers, promote our brands and grow our businesses. The healthier they are, the more present they will be, both on and off work.
The opinions expressed here by Inc.com columnists are their own, not Inc.com’s.
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