This is the second post in a series that explores the extent of financial stress among Americans, how that stress affects businesses, and what the path forward looks like. Read the first post here.
The first post in this series explored a disturbing trend: Millions of Americans are living paycheck to paycheck, facing insurmountable debt, and struggling to make ends meet. Because they lack financial stability in the present moment, the steps toward a stable future — paying down debt, saving for retirement — simply aren’t within reach. This is a profoundly stressful way to live that affects everything from physical health to the ability to focus on work.
In 2018, Northwestern Mutual’s annual Planning & Progress study found that 78% of Americans feel stress over retiring comfortably, while 21% have no retirement savings at all. The same study found that money is the top cause of stress — a finding that’s echoed by the American Psychological Association, which reports that money causes more stress than work, health, or relationships. Similarly, PwC’s Employee Financial Wellness Survey found that 67% of employees feel stressed about finances.
All this stress is associated with migraines, insomnia, depression, and declines in cognitive abilities. And according to the APA, it’s getting worse: Between 2017 and 2018, average levels of anxiety among Americans jumped by five points, with the greatest increases found in anxiety around paying bills.
It’s not just low earners who are susceptible to financial stress, either. This is an issue that affects people up and down the income ladder. Of families making $150,000 per year or more, 25% are living paycheck to paycheck. The number increases to roughly 33% for families earning between $50,000 and $100,000. And of families learning less than $50,000, one half are living paycheck to paycheck.
PwC’s wellness study found that 35% of employees reported being distracted by finances while at work; of those employees, 49% admitted spending three or more working hours each week dealing with personal finances. In PwC’s Special report: Financial Stress and the bottom Line it was revealed that 12% of financially stressed employees miss work occasionally due to financial stress, with 31% saying their productivity has been affected.
Employers report that the problem could be even worse. In a survey conducted by the International Foundation of Employee Benefit Plans, 60% of employers report that financial stress affects their employees’ ability to focus, and 34% report absenteeism and tardiness. Another study published in the Journal of Financial Counseling and Planning found that financially stressed employees are less likely to be productive, and that stress as a reason for absenteeism has increased over 300% since 1995.
For an employer with 10,000 workers, that adds up to 3,000 distracted employees, and 1,380 workers spending more than three hours per week dealing with financial stress. According to PwC, this can mean losses of up to $3.3M per year. And that doesn’t even include the 12% of employees who admit missing work from time to time — PwC estimates that could cost as much as another $166,000 per year for an employer of 10,000.
Employees don’t have enough savings to keep themselves afloat. They’re living paycheck to paycheck, embroiled in day-to-day battles to pay bills and handle emergencies. They’re bringing that stress to work, and it’s hurting bottom lines at businesses around the country.
The key to putting employees on the track to financial wellness — thus reducing their financial stress and its effects on business — is to help them save money. In our next post, we’ll explore what solutions aligned with this goal look like, and how businesses can begin moving forward.
Want to learn more? Download our newest e-book: A Guide to Financial Wellness: The Employer’s Handbook for Understanding On-Demand Pay and Financial Wellness Benefits.
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