The Role of Financial Wellness Amid Rising Inflation

As more employees worry about their ability to make ends meet, they are looking to their financial advisers and HR professionals for help.

A significant number of employees have lost their financial footing in the last several years, thanks to the lingering impacts of the pandemic and the rising costs of housing, gas and groceries. As calculated by the Department of Labor, the overall price of consumer goods and services has risen 8.6% year over year as of May—the largest 12-month increase since December 1981.

According to Morgan Stanley at Work’s recent “State of the Workplace Financial Benefits Study,” 91% of employees surveyed reported having faced personal financial issues this year, with the top three being difficulty with household budgeting (47%), debt reduction (42%) and emergency and short-term savings (30%).

More than half (59%) of employees said they needed to reduce contributions to savings, debt or loan payments, the survey report says. These reductions occurred across 401(k) savings accounts (29%), long-term savings (28%), emergency and short-term savings (25%) and debt/loan payments (25%). Furthermore, 64% of employees reported that financial stress is negatively affecting their work and personal life, while 82% of employers are worried that personal financial issues affect employee work productivity.

Money Stress Is Pervasive Today

Krystal Baker Buissereth, head of financial wellness at Morgan Stanley, says the results show people are clearly stressed about their money, their bills and their savings. Though many have felt financial pressures for some time, the persistent inflationary environment is raising new questions about the affordability of the basic necessities of gas, groceries and rent.

As more employees worry about their current ability to make ends meet and their future comfort in retirement, they are looking to their employers for help, Buissereth says, while many companies realize their employees are in a time of need and are implementing new wellness programming in response. As Buissereth points out, all generations in today’s workforce can use extra support.

“Sometimes there is an assumption that financial wellness programs are designed only for those employees who are just starting out or those who have lower incomes,” she observes. “That is not the case. We are seeing financial wellness resources impacting all levels of a given organization—even more acutely in today’s environment.”

Buissereth says she has seen how much even the higher earners in an organization can benefit from targeted support. Many in this group, she explains, are worried about financing their current lifestyle or are nervous about the potential of a major unexpected expense.

“Companies, more and more, are coming back to us or to their vendors and asking whether we can do more for their employees at this time of need,” Buissereth says.

Financial Wellness Benefits With Value

Buissereth says HR professionals have a difficult job today, but one of their priorities must be to deliver valuable support to an organization’s people.

“The best way to add value is to listen and help employees step in areas that are causing them the most pain,” she suggests.

Buissereth says one of the basic starting points for helping an employee dealing with a personal finance issue is education. It is important that companies provide flexible options, so they can deliver resources to those who may not be able to step off the floor or are out in the field.

“You have to meet people where they are,” she says. “That can include providing robust digital tools, recording seminars or webinars for employees to watch later and, most importantly, offering access to a financial coach. We are seeing more demand for financial coaching than we have in the recent past.”

As Buissereth put it, financial coaching is about sitting down with individuals and addressing their unique challenges.

“A financial coach is someone that works with you on building your financial fundamentals,” she says.

But it doesn’t stop there, Buissereth says. Inflation and a slumping economy affect everyone, including those with higher incomes, who now have less money to pay down their mortgages or student debt. Financial planners will have to work with each individual personally to help them make many tough decisions.

The financial fundamentals can include debt management, credit building or building a budget, Buissereth says. Working with a financial coach can be critical for improving financial wellness—especially for those on the lower end of the income spectrum.

Competitive Compensation Is a Must

Another way for companies to bring value to the table for their employees is to compensate them competitively, Buissereth says. Though this is obvious, she says, less obvious is the fact that compensation can come in different shapes and sizes.

“Yes, there is the cash component where you need to be competitive in terms of paying an appropriate and competitive salary to individuals,” Buissereth says. “But I actually challenge companies to look more broadly.”

Other forms of compensation could include equity compensation, where an employer allows employees to build wealth and participate in any future growth of the company, Buissereth says. Additionally, offering student debt assistance or an attractive retirement plan that includes a match or automatic enrollment could also add value.

“The final piece of this is making sure you are working with your vendors to educate individuals so that they’re not leaving for the next place due to two extra dollars an hour … when in fact they left their current company with thousands of dollars of equity sitting there,” Buissereth says.