As we know, the financial services industry is known for its slow uptake of new technology, favoring instead the ‘tried and true’ tactics...
February 21-28, 2022 marks America Saves Week, an annual tradition that brings national attention to the importance of improving financial stability. The intention is to raise awareness, educate and motivate individuals and families alike to save more.
Whether it’s a career change, a medical emergency, or a sudden car repair the future is unpredictable. Although we can’t predict what’s to come, we can expect the unexpected– we just don’t know when. Saving is one of the best ways we can prepare and bounce back from financial stress.
THE SAVING SITUATION
Today, in the wake of the ongoing global pandemic, many Americans are focused on economic recovery. According to this year’s Survey of Household Economics and Decisionmaking (SHED), published by the U.S. Federal Reserve:
- Nearly 25% of American households surveyed stated that they were in a worse financial situation than the previous year.
- Although most Americans reported spending less than they earned, fewer people were employed in 2020 and less than 25% did not return to the workforce, citing health limitations, childcare or family responsibilities and an overall lack of opportunity as the major setbacks from finding work.
- Despite the ongoing pandemic, many adults identified healthcare as the number one sacrifice if faced with insufficient savings or financial hardship.
- Of the 95% surveyed that had a bank account, 29% of adults experienced problems such as unexpected fees, fraudulent transactions, delays or problems with customer service- which disproportionately affected those with reported incomes below $50,000.
- 40% of those that held a credit card had more month-to-month debt than the previous year,
- 9% of workers tapped into or cashed out of their retirement savings in 2020.
- 26% of workers reported having no savings or retirement investment plan.
More alarmingly, the report showed the inability of Americans to withstand small to medium financial emergencies:
- More than 25% of adults were unable to pay their monthly bills at one point during the year.
- 45% did not have the financial resources available for an unexpected $400 expense.
This survey clearly identifies a broad, collective need for organizations and policy solutions to increase awareness of the systemic issues faced by Americans. An additional way employers can address inadequate savings is by offering a wider range of materials and resources to educate employees about the basics of personal finance.
SAVING TO BUILD FINANCIAL RESILIENCE
Financial resilience is the ability to build enough financial resources to adapt to change. More than having access to cash, financial resilience involves a conscious effort to understand your earnings and expenses as well as being aware and willing to seek out available opportunities and resources that support and increase your financial wellbeing.
Financial resilience is an essential component of financial health and can be achieved by organizing your personal finances, building an emergency fund, paying off debt and continuing to educate yourself on ways to increase your economic well being.
AMERICA SAVES WEEK
Founded in 2007, America Saves Week is an initiative sponsored by the nonprofit Consumer Federation of America (CFA) and represents a collective collaboration of thousands of nonprofit, educational, government, financial institutions and organizations. According to the America Saves Report 2022, there are a record number of 2,278 participating entities that will help widen the reach and increase the overall impact of the events, seminars, activities and promotions planned for America Saves Week. This coordinated effort strengthens its mission to set a better example for financial health by helping to motivate Americans to take better control of their finances, and save more effectively.
The America Saves Week committee distributes resources and materials and organizes webinars and events. Events are structured to provide tips, tools, strategies and resources that savers can easily implement into their daily lives. Events are a call to action to help achieve financial goals. Materials and information provided during the events, such as individual resources and digital toolkit are free to access and share.
America Saves Week is also an opportunity for participating organizations and their networks to serve their local communities in a tangible way, helping to contribute to the national conversation on economic empowerment, to inspire a collective commitment to save, to define financial goals and to provide effective planning for Americans to achieve and improve their financial stability.
Each year, America Saves Week adopts top savings goals as themes of the planned activities. This year, the central theme for America Saves Week 2022 is Building Financial Resilience, which is broken down into the following subthemes:
- Saving Automatically
- Making saving a habit is equally important as clearly defining a goal for saving.
- The best (and easiest) way to save is setting up automatic allocations to a savings account through your bank or brokerage.
- Saving for the Unexpected
- “Unexpected” includes anything that happens in the future: an emergency, unemployment, a disability, a repair….but also a vacation, a move, or an addition to your family!
- Saving is a cyclical process: while you build your savings, you can (and should) spend moderate amounts of savings on things that you need or want
- Saving to Retire
- Saving for retirement is a present priority
- There are key differences between saving in the short term and for the long term: many people often neglect their long term future or do not prioritize their financial wellbeing during retirement
- There are many date-targeted funds or investment strategies available to ensure that you can have enough during retirement
- Saving by Reducing Debt
- While saving is one of the most important steps to achieve financial resilience, paying back debt is close second
- Being debt-free is liberating because any and all money saved thereafter is yours
- You actually save money when you reduce debt- paying off debt reduces future interest and fees from creditor
- Saving as a Family
- Saving is necessary for the whole family- the best time to save is today
- Saving helps assure access to tools and the building blocks necessary for future financial resilience
- Younger savers will benefit the most from saving more, sooner which will compound and grow over a longer period of time
HOW EMPLOYERS CAN ACT NOW
Employers have the ability to promote and cultivate financial resilience among their employees by providing a holistic financial wellness solution. When employees have access to such resources, at no cost to them, they are in a better position to make financially responsible decisions for themselves or on behalf of their families. Couple those resources with real-person coaching for guidance and accountability, and that’s when real behavior change begins to happen. In return, improved financial well-being among employees leads to less financial stress overall which can translate into increased productivity and reduced turnover in the workplace.
For employers, there are certain steps necessary to accurately assess your employees’ financial stress such as conducting a survey to gain more insight into your employees’ financial situations. For example, you’ll be surprised to know that 33% of employees in one survey spent more than 3 hours per week at work thinking about their finances. Then, employers should consider offering a solution that will help employees take greater control of their financial lives, starting with building an emergency savings fund. Other solutions might include savings incentive programs, access to a financial coach, or hosting a complete financial wellness program with clearly stated goals and benefits.