Consumer debt in the United States continues to rise with no end in sight, with the average American household owe more than $155,000 — an increase of more than six percent from last year. Home buyers will soon be able to capitalize in a slowing housing market, but the supply chain problems that arose during the pandemic continue, and federal relief measures to help American households are no longer in play.
As debt continues to rise, so do financial shocks, which Pew defines as a significant loss of income or a major unexpected expense. Sixty percent of Americans experience one financial shock and one-third experience two or more per year. This puts more financial pressure on American families, nearly 70% of whom do not have emergency savings. These costs are typically around $2,000, which is half a month’s income for the average household.
Draining existing savings is often the first option when employees face a financial shock, and once they do, it’s not easy to get it back. Almost 50% of American workers who exhaust their emergency savings have not been able to rebuild them. After that, many employees, especially those with subpar credit scores, are forced to turn to expensive sources of credit, especially sources where they can get money quickly. Payday loans, online installment loans, pawn shops, and loans from friends or family top the list.
Financial shocks can take many forms. Shannon, who works in a hospital system in Nevada, needed $23,000 to repair the house where she lives with her daughter and her grandchildren after a flood destroyed it. For Jenell, a teacher who supplements her salary by traveling during the summer and training other teachers, COVID-19 cost her at least $10,000 in wages she relied on. Water heaters break, unexpected medical bills crop up, and the list goes on.
This has a profound effect on companies. Employees dealing with high-cost debt are more like be experiencing financial stress, which makes them vulnerable to depression, anxiety, and troubled relationships with family, friends, and co-workers. They feel shame and panic and are constantly on edge, worrying about the next financial storm. in the workplace, half of the employees Debt-stressed spend an hour per week on average dealing with debt-related problems at work. And they are more than twice as likely to seek another employer.
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With debt so widespread, why is it still such a taboo subject in corporate America? And, more importantly, how can business leaders internally change the tone of the debt conversation?
end the stigma
In the early days of the COVID-19 pandemic, companies were on their way to becoming more empathetic, but not nearly as fast. Only 13% of employees say they can talk openly about money at work and get the help they need and, in a recent Gallup poll of more than 15,000 workers, only a quarter responded that they strongly agree that their employer cares about their well-being, half the percentage who responded that way in the early days of the pandemic.
This is discouraging news for employees, many of whom fear exposing their financial shortcomings, believing it implies weakness and could affect their standing in the workplace.
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For employers to end the stigma of discussing finances, and debt in particular, at work, they must recapture the empathy they have shown themselves capable of during the pandemic and create a culture of openness, support and non-judgment.
Doing so builds trust with employees and, over time, loyalty. What a workerMonique, said of her company that offers wellness benefits, “It just made me like my employer more because they don’t just pay me, they help me financially as well as health and mentally.” Health.”
Implement programs that prioritize financial resilience
While empathy allows workers to open up, it is supported by programs and benefits that keep them from leaving. More than 40% of workers in a recent survey They said they left their jobs in search of better benefits.
Employers have taken notice, particularly as workers during The Great Quit fled their jobs in search of better opportunities and benefits. eighty five percent said your earnings data is important in defining your earnings strategy. For employers, that means getting to know their workers and the challenges they face, including finances. Six in 10 workers say financial wellness benefits that promote savings are a top priority.
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Salary-linked benefits can offer employees access to emergency savings accounts or affordable credit to help pay off high-cost existing debt. This allows them to save more money for unexpected expenses that may arise in the future.
The pain workers feel from debt is real. It leads to anxiety, stress, and other mental health issues that not only affect them at home but also at work. Employers have an opportunity in front of them: take a page from the pandemic playbook and show greater empathy and implement support programs that help workers deal with debt effectively and build financial resilience.