Twenty-three years after founding her own company, Amy Power still remembered the feeling of living paycheck to paycheck. The CEO of The Power Group, a Dallas-based public relations and crisis management firm, Power wanted to ensure that her employees did not make the same financial mistakes that she did in her twenties. Her 14 employees, most of whom are Millennials or Gen Z-age, needed to know how to manage their salaries for the long term, so Power offered them something she wished she had at their age: access to a personal financial manager.
“It takes some stress off the employee,” says Power, whose company made Inc.’s 2022 Best Workplaces list. “If they’re worried day-to-day about making ends meet, how are they going to really be focused when they need to be?”
Americans are navigating a tricky financial moment, facing the highest consumer prices in 40 years, investment portfolios battered by a fresh bear market, and increasing odds of a recession in the next year. More than 60 percent of Americans lived paycheck to paycheck in April, up nine percent year over year, according to research from PYMNTS, an industry publication and data provider. A third of people earning annual salaries of $250,000 or more reported having little to nothing left in their bank account at the end of the month.
Americans also lag behind the rest of the world in financial literacy with very few people receiving any formal education in the subject. Only one out of five students in the U.S. are guaranteed to take a personal finance class before they graduate high school, according to a 2021 report from the nonprofit Next Gen Personal Finance, which offers financial and economic classroom materials for educators. Minority and low-income students are even less likely to take a course in the subject. That means many young people enter the job market with little idea of how to manage their first paycheck.
Providing personal coaching.
Since Power began offering the financial wellness program to her employees earlier this year, around 70 percent of The Power Group team have participated. The company covers the cost of Life Style Plan, a SaaS software platform that starts at $100 a month per person and includes personal coaching sessions, which are typically held during the work day.
More important than managing a budget, Power sees her team learning how to build wealth at the beginning of their careers. “We need to be taught this and we need to practice it,” she says, adding that the decision to provide personal finance resources struck her as a no-brainer. “I don’t know why we as employers haven’t been doing it all along.”
About half of Americans have access to retirement savings programs through their jobs, but workers are eager for more than just an employer-sponsored 401(k), particularly those at the beginning of their careers. Two-thirds of Gen-Z workers believe their employers have a responsibility to help improve or maintain their financial wellness, according to a 2022 report from the financial services organization TIAA. More than 60 percent of millennials agreed.
“Younger Americans are more likely to believe that employers have a responsibility to help their employees be well mentally, physically, and financially,” the report said. “There is a major shift underway in expectations.”
Relieving financial stress.
Companies are increasingly offering financial planners as a perk to alleviate pressure on their workers and improve concentration, according to Rebecca Shipley, senior vice president at Daytona Beach, Florida-based insurance provider Brown & Brown.
“It’s really become part of this notion of wellness and helping an employee be well rounded,” said Shipley, who has advised businesses on their compensation and benefits packages for over 25 years and says employers are now thinking more holistically about the health of their employees, which includes their finances. Money remains the biggest source of stress among American workers, according to a recent PwC survey. That stress can impair productivity, attendance, and retention, as financially stressed workers were twice as likely to look for a new job.
Importantly, investing in employees’ financial well-being doesn’t have to be cost-prohibitive, Shipley says. Her advice for small businesses: “Don’t be afraid to ask your partners to engage. If you have a retirement plan, ask your administrator to come in and help with that.”
Improving financial literacy.
Human resources software provider BambooHR began offering free financial literacy courses through Financial Peace University in 2012, four years after its founding. The Lindon, Utah-based company has spent $30,000 offering the FPU course over the last decade, but the training launches a virtuous cycle, according to Justin Judd, BambooHR’s CFO.
“It pays dividends,” he said. “If they’ve put those principles to work in having financial freedom and peace in their financial lives, they’re going to be more productive.” Since 2012, the amount of money saved and debt repaid by the hundreds of participating BambooHR employees stands at $2 million.
When new hires start at the BambooHR, they also meet with a dedicated financial advisor, who can go beyond retirement planning to discuss any fiscal concerns. The service, which is free of charge to employees, comes through the company’s 401(k) program. Financial health is often overlooked by employers to their detriment, says Judd. “Investing in people and helping them to be successful in all aspects of their lives actually helps workers to be really effective, and that effectiveness leads to taking care of great customers, which leads to successful businesses,” he says.
Efforts to improve the financial health of employees appear to be working. TIAA found that workers who participated in financial wellness programs were twice as likely to be financially healthy. At the Power Group, employee participation in Life Style Plan has already paid off for both the individuals and the company. Within the first few months, Power received a text from her youngest employee, who is in her first full-time job, thanking her. Power said the personal finance education has enabled her team to be more focused, creative, and adept at analyzing cash flow and income statements. Deciphering the company’s profits and losses and communicating with the C-suite at a high level requires an understanding of your personal finances, said Power.
“I’m trying to create the next generation of business people,” she said “You’ve got to have the financial chops and understanding to be able to move into leadership roles in any company, not just mine.”