2020 was a year no one could have predicted and we’ll all be dealing with the aftermath for a long time. As we begin seeing light at the end of the tunnel it’s important to understand the challenges ahead and how to prepare. The economic impact of the last year has been sharply divided, with some people able to work with minimal change while others have seen hours cut, or jobs lost entirely. As the country hunkered down last spring we actually saw the national savings rate hit a record 33%, but pent up demand for travel, dining out, and vacations has been building for almost a year now. Two rounds of COVID relief funding have already been sent out with a third possible round on the horizon. While we’re optimistic about what 2021 will bring helping employees see the big picture is important in getting them to save and pay off debt.
The Metaphor Many Employees Can Relate To
Think about it this way. Bert’s credit card balance keeps going up and he suffered a salary cut in 2020. Bert’s a good man and wants to maintain his family’s lifestyle. This unfortunately results in a higher interest rate on his card, and he is forced to borrow more off his credit card just to pay the minimum. Suddenly Bert’s credit card company won’t give him any more money. He has no money saved and is already paycheck to paycheck. Bert’s only option is to change his spending habits and his lifestyle. The same scenario is true for the U.S. government, and we’ll all suffer the consequences; if not 2021 then eventually.
The Big Picture Problem
The following graph illustrates the problem. U.S. debt is growing at an unprecedented pace (credit card balance), but tax revenue has fallen to pay for it (salary cut). The government still spends massively (try to maintain our lifestyle as long as we can). The government issues even more debt (using the credit card to pay for the credit card). Interest on the debt goes higher (interest on your credit card) as the federal reserve tries to inflate the economy. Taxes increase to pay for the debt which slows the economy. Finally politicians realize that the only option is cutting spending (decrease your spending habits). This helps but will also further slow the economy. All of this could result in a long term economic recession and possibly a depression (lifestyles change for everyone).
A Financial Wellness Solution
Employers can help their employees financially prepare for bumpy roads ahead. Here’s a few ways to do that:
- Use numbers to demonstrate the value of existing benefits. For example, email each employee a 401(k) calculation. It can demonstrate how an employee making $50,000 can save $900,000 over 30 years. Every benefit has a value and employees need to understand and take advantage of all that’s offered to them.
- Introduce financial well-being during non-enrollment season to increase engagement. Employees engaging with financial tools and coaches is the best way to help them find a smart and sustainable financial path.
- Give employees specific ideas on how to save. Encouraging saving is great but employees want action steps, like these:
- “Save by switching out of cable to a streaming service.”
- “Some memberships and subscriptions are negotiable. Here are a few examples…”
- “Here are specific ways to reduce your grocery bill.”
About BrightDime
BrightDime is a financial wellness solution designed to create real behavior change and enhance financial wellness for all employees. BrightDime partners with progressive companies to integrate financial wellness into their total employee well-being strategies, leading to improved workforce productivity and engagement. BrightDime cares deeply about improving financial wellness in America, one employee at a time. For more information, www.brightdime.com.