EL SEGUNDO, Calif.–Two new surveys have been released offering insights into employee financial resilience during the COVID-19 lockdowns, along with a look into racial disparity in financial wellness.
The two reports, the 2020 Financial Wellness Year in Review (YIR) and the Race and Financial Stress Special Report, were released by Financial Finesse.
For the former report, Financial Finesse defined financial resilience as the ability to bounce back from an unforeseeable financial setback, is one of the strongest contributing factors to financial wellness.
To better understand financial resilience, Financial Finesse said it assigned employees studied to one of four groups—the financially resilient, susceptible, determined, and vulnerable—based on the presence or absence of an emergency fund prior to and during 2020.
What Analysis Found
According to the company, it’s analysis found:
- Financial Resiliency is Sticky (and Attainable): Ninety-four percent of employees that had an emergency fund prior to 2020 maintained it, and 26% of employees who needed an emergency fund acquired one in 2020.
- Cash Flow and Debt Management Are King: Employees who have a handle on cash flow and an emergency fund are 17 times more likely to report "no" financial stress and 4.5 times more likely to be comfortable with their debt than those with neither, Financial said.
- Minorities and Woman Made Great Strides: Black, Hispanic and female employees, and those with lower HHIs (<$60,000), experienced the highest net improvement in financial resilience.
- Significant Disparities Still Exist: For example, single, Black moms are seven times more likely to have high or overwhelming financial stress than married, Asian dads.
‘ROI-Positive Way to Take Action’
"There is no mistaking the influence that cash flow and debt have on financial resilience," said Financial Finesse Founder and CEO Liz Davidson. "For employers seeking to improve financial well-being across their organizations, with focused attention on those who need help most urgently, integrating a holistic financial wellness benefit built to tackle proven determinants of financial resiliency with personalized and ongoing coaching, is an effective, ROI-positive way to take action."
Effect of Debt
Added Craig Copeland, senior research analyst for the Employee Benefit Research Institute (EBRI), "Debt is one of the biggest factors affecting workers' retirement expectations and ability to save or prepare for retirement."
According to EBRI's Retirement Confidence Survey, workers who are comfortable with their debt are nearly twice as likely to be confident about their retirement, and 55% more likely to have saved for retirement, than workers who consider debt to be a major problem.
"Getting debt under control and focusing on financial resiliency during one's working years can make all the difference in having a financially comfortable retirement,” he added.
Race & Financial Stress
Meanwhile, Financial Finesse said its Race and Financial Stress Special Report digs deeper into the economic and financial wellness disparities that persist among racial minorities.
According to Financial Finesse, the report's findings are already being embraced by Financial Finesse partners to optimize their financial wellness programs.
"It's refreshing to see so many organizations commit to solving the racial wealth gap," said Laura Finn, the report's author and a senior consultant at Financial Finesse. "Understanding, then solving for the underlying financial wellness issues is key to bringing all of us closer to financial equality."
Feeling Stress
Added Greg Ward, director of the Financial Finesse Financial Wellness Think Tank, "Our reporting shows that employees with an emergency fund and a handle on cash flow are one-tenth as likely to experience. Historically, women, African American and Hispanic employees, and single parents have reported the highest levels of financial stress. This suggests that targeted outreach to stressed populations should focus on cash flow and savings for maximum stress reduction."
Download the full "2020 Financial Wellness Year in Review" here.
Download the full "Race and Financial Stress Special Report" here.