3 ways to help employees reduce financial stress
As we reflect upon the past 12 months, the importance of saving for the unexpected has become even more critical.
Unfortunately, heading into the pandemic shutdown, many Americans were not well-prepared. In fact, according to a 2019 study by the U.S. Federal Reserve, only 4 out of 10 Americans would be able to cover a $400 emergency expense1. Lack of savings can be stressful, so in the spirit of Financial Literacy Month, here are three ways an employer can encourage their employees to prepare for the next financial emergency:
1. Commit
This is the time of year when many employees look forward to some extra cash. Whether it's a raise, bonus, stimulus check or even a tax refund − for many Americans, these are the largest financial boosts they will see all year. Encourage your employees to make a commitment for how they will save these funds. It has been proven that if we commit today, we are more likely to follow through later2. A great place to start is by adding to emergency savings and aim for the 3-6 months of living expenses that most experts recommend.
2. Automate
Help employees set it and forget it by leveraging technology. Encourage them to set up automatic transfers to make saving convenient and easy. Even if they cannot yet commit to saving a larger amount, help them identify an amount that is realistic. Start by encouraging an increase in savings by 1%, preferably at the same time as a raise, so the funds won't be missed and then make sure it gets automated. As employees earn more, they will need to save more.
3. Stock up
With many more employees working from home, there may be a greater desire to declutter one's living space. A smart way to reduce clutter and boost your savings is to sell unwanted items. Encourage your employees to do this via virtual marketplaces such as Craigslist, Facebook and eBay and stock up on additional savings.
Employees can reduce future financial stress by learning from the past and taking steps to build a financial cushion. Bonus tip: Save for emergencies with BCU's Rainy Day Savings™ Account and earn more than 10x the national average. Start saving at BCU.org.
Sources:
1 https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm>
2 https://advanced-hindsight.com/case-study/how-pre-committment-leads-to-better-tax-time-savings/
• Bjorn Larson is senior strategist for financial well-being at BCU.