Many Americans are struggling financially. Some of them are your employees. You want to help them. Your leadership team wants to help them. But how?

You’ve read about things like the paycheck to paycheck cycle, financial wellness, earned wage access, retirement readiness, financial preparedness — but gosh darnit, nothing that breaks the problem down in a way that tells you where to start.

We’re going to be friends, you and me.

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Imagine, for a moment, you’re on the way to work and you get a flat tire. You call up roadside assistance and tell them what happened. They ask if you have a spare — nope, your car didn’t come with one. No worries, they’ll bring you a tire. They ask what kind of car you have. You tell ‘em. Aaaand... that’s the moment you learn that new tires cost $200.

They ask for a debit card, and you break out in a sweat. You check your bank app. You don’t have $200 in your bank account. Guess you’re not getting to work today.

It’s months later. Flu season, and your husband gets sick. He works hourly at the grocery store, so if he doesn’t work, he doesn’t get paid. You lose his income for a week, but rent is still due. You go to your bank’s website to check what you already know: You don’t have any money in your bank account. You spent all your income on bills already. Guess you’re not paying rent.

People struggle financially for lots of reasons. Almost always, those reasons end up creating the same problem: not having money in your bank account.

I’ve started referring to the problem as “not having money in your bank account,” instead of fancier phrases “living paycheck to paycheck” or “inability to withstand financial shocks” because using plain English words like “not having money in your bank account” makes it obvious why it’s bad.

It is easy to imagine why not having money in your bank account is a problem. People struggling financially often don’t have money in their bank account. This is the problem your people need help with.

To help, you need to focus on:

1. Making sure people can get money in their account when they need it desperately
2. Making sure people can save money, so they have money in the bank to prevent moments of desperation

Making sure people can get money when they’re desperate

Most tools that let people get money in moments of desperation are predatory — as an employer, it would be irresponsible to offer those to your employees. Take payday loans for example. They just feel wrong. But why?

Most tools for getting money in moments of desperation are predatory because they’re either insanely expensive, or worse, trap people in a cycle of dependency where they end up needing to use it all the time, paying out the nose as they go. People often end up worse off than they started, and this trap is why payday loans are dangerous.

On the market today, the most affordable tool for getting money quickly is earned wage access (EWA), a new financial service that allows people to access their own wages, before payday, for a small fee. But not all EWA tools are responsible, because most of them can inadvertently trap people in the same cycle of dependency that a payday loan can.

To avoid trapping your people in a cycle that leaves them worse off, you need to choose an EWA vendor that does not make more money when people use EWA to get money. Think of it this way: If people have money in the bank, they’ll just use it to pay rent. They won’t be in a rent money emergency, needing to use EWA, thereby helping the EWA provider rack up more fees off a desperate person. So you want an EWA vendor that helps people if and when they’re desperate, but doesn’t make money off their desperation.

Helping people have money in the bank, so desperate moments stop happening

People don’t have money in the bank because they’re using all of it. To always have money in the bank, you need to consistently spend less than you make.

We have this idea in our country that if people are spending all their money, they must be making irresponsible choices, like buying expensive sneakers or luxury cars or lifetime supplies of avocado toast or something. Basically, we tell struggling people that it’s their fault.

Yeah, that ain’t it.

People who are living close to the edge are very responsible with their money. They have to be. Research from nonprofits like the Financial Health Network, Aspen Institute, Financial Health Diaries, and many others shows that people spend all of their money because:

1. They literally don’t know how much money they have. More than half of the American workforce has an income that fluctuates significantly from paycheck to paycheck. Imagine trying to make a budget for your next paycheck when you don’t know how much money to budget for!
2. Even if people do know how much money they have, they don’t know how much of it they can spend. Traditional budgeting tools don’t work, because they’re too much work. So people do the best they can, making educated guesses about what they can spend. Good luck!
3. Guessing about how much you can spend is much more dangerous than it used to be, because families have to spend much more of their money on life’s essentials than they used to. In the past 40 years, education costs have gone up by 400%. Healthcare has risen 600%, childcare is up by 300%, and housing has doubled, and that’s after adjusting for inflation. There’s just too much bread nowadays, and not nearly enough butter. As a result, people go into debt to pay for these essential things. That debt is expensive and compounds, so this is sort of like carrying your money around in a bucket, and the bucket has a hole in the bottom which slowly gets bigger. All the money that could be going in people’s bank accounts is falling out of the bucket instead.
4. As the hole in their bucket gets bigger, making ends meet gets harder and harder, so people turn to short-term debt to get by. As we’ve discussed, this debt is expensive and people often get stuck in a cycle of dependency, which only makes the hole grow faster.

The fact of the matter is that people are struggling because they’re playing a game that’s impossibly difficult (which we never teach you how to play, by the way), not because they’re irresponsible.

Now let’s explore how to get started helping.

How to pick vendors to help

So you know at this point that you need to help your workers, and you know it’s going to take more than financial literacy programs to get you there. There are a handful of products and services that say they can improve your employees’ financial wellness:

• Branch
• Brightside
• DailyPay
• Even
• PayActiv
• SmartDollar

But when you’re looking at these providers, what are you supposed to be evaluating?

The Financial Health Network and Consumer Financial Protection Bureau have both created frameworks for how to help people become financially healthy, and they both boil down to solving the four problems we just covered:

1. Help people plan ahead. Help them know how much money they’re going to have when they get paid.
2. Help people spend less than they make. Help them know how much of their money they can use to buy stuff.
3. Help people save enough money to handle life’s road bumps, before they start paying their debts. Then, help them use surplus savings to pay down debt.
4. Help people get cash responsibly. Give people affordable tools for solving emergency cash flow problems that do not risk a cycle of dependency.

Using this framework as the foundation for your evaluation will ensure you choose a vendor that will help your people get money when they need it, and have the tools for always having money.

Key things to evaluate

Here’s one other thing you need to know which may not be obvious: You’re going to be dealing with vendors in the financial services and education markets. These markets are… well, let’s just say it’s prudent to assume most products in this market do not actually work. You’ll need to investigate vendors along three lines:

1. Engagement, because people need to actually use the thing for it to work.
2. Outcomes, because typically these tools don’t work, so it’s important to see actual evidence that the tools help people have money in their bank account now and always
3. Motivations, because these vendors are businesses, so it’s important to check if they profit when they help people always have money. If they don’t, it’s likely they will deliver less and less of that outcome over time, as they face pressure to make more money.

Sample evaluation questions

Here are sample questions that align with the financial wellness framework and evaluation topics:

We’re off to the races!

If you focus on helping your people have more money in their bank account, and choose vendors to help based on this evaluation framework, you’re going to be miles ahead of other employers.

Godspeed!

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About the author

Jon Schlossberg is the founder and CEO of Even. He is a behavioral psychologist by training, and in his career has made websites and apps that millions of people use around the world. He has been researching and working to improve the financial health of Americans since 2014.