As the country transitions from one crisis to another, more Americans face financial hardship, according to a poll conducted by Salary Finance, the world’s largest supplier of socially responsible financial solutions in the workplace. Lack of COVID initiatives like student debt forgiveness and expanded child tax credit, high housing costs, and record-high inflation exacerbated by the escalating war in Ukraine is likely to be the root causes of the highest percentage of financial stress in the survey’s four-year history, which frequently results in anxiety and depression.
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According to the fourth annual Salary Finance Report, workplace financial stress has increased from 42% to 45%. It is alarming that employees are depleting their funds: one in every five American workers runs out of money between paychecks. Nearly 60% of people facing financial stress are living paycheck to paycheck.
While the survey discovered some encouraging signs this year that workers have increased work/life flexibility to better manage crises – work issues, health concerns, and the state of relationships all improved year over year, indicating that businesses are becoming more empathetic in the aftermath of COVID – American workers are still struggling to manage their finances effectively during these trying times:
- Three-quarters of respondents said that inflation had affected their finances.
- More than two-thirds do not have emergency funds put up.
- Over half have less cash on hand than they had a year ago.
- One in every two people lacks emergency funds and is nervous about it.
- Four in ten are dissatisfied with their present amount of savings.
Financial strain has a cascade impact. Financially stressed people experience more sleepless nights, job distractions, bad relationships with coworkers, and mental health issues than in the past. Over 80% of persons experiencing financial stress suffer from anxiety, and approximately 60% suffer from depression. These mental health consequences affect every aspect of life, including a job.
“American employees are at a crossroads,” Salary Finance CEO Dan Macklin said. ” At the same time as there is some hope regarding the drop of COVID cases, we are seeing the victims of a European conflict and debilitating inflation that affects everyone on a worldwide scale. Employers are demonstrating increased empathy for their employees, but we need more of it. Employers must implement programs that prioritize work/life balance and place a higher focus on financial initiatives that help people get out of debt and into savings.”
The factors contributing to this include inflation, student loan debt, the housing market, and the enhanced child tax credit expiration.
It’s not difficult to determine why financial stress is increasing. American employees face a perfect storm of increased money outflow and decreased inflow.
In January 2022, inflation reached a four-decade high, affecting the cost of gasoline, energy, automobiles, housing, and food. Seventy-six percent of employed Americans said inflation had affected their financial situation last year. An overvalued, highly competitive housing market shows no signs of slowing. Housing expenses increased by the most in over two decades previous year.
As inflation and the property market soar, employees lose perks from the epidemic. Almost 60% of workers with student loan debt took use of the deferment provisions included in the CARES Act legislation – and more than a third would be unable to begin repayments this spring.
Similarly, many American employees relied on the expanded child tax credit program. 59% of parents with school-aged children reported earning credit in the research. 40% of them said that the money aided in accumulating savings, and more than 20% stated that it helped pay monthly bills and costs.
The result is that funds are depleted, credit card use increases, and retirement savings are cannibalized.
The tangle of elements that contribute to financial stress is mind-boggling – and the result is financially disastrous for many American employees. This includes the following:
- Inadequate savings. Nearly 70% of American workers lack emergency savings, and roughly one-third lack at least $1,000 in cash or liquid savings.
- Enhanced reliance on credit cards. One-third of credit cardholders are questioned about carrying credit card debt monthly. Over 40% of them have a balance above $3,000.
- They were taking out a loan against one’s retirement funds. This year’s poll revealed an alarming increase in the percentage of workers who withdrew cash from their retirement accounts in the preceding 12 months. According to last year’s report, the number has decreased to less than 10% of workers, mainly owing to stimulus payouts, accessible forbearance programs, and the expanded child tax credit. Nearly 20% of workers questioned this year said they have withdrawn funds from their retirement accounts.
Employer trust is eroding – as firms battle to keep key personnel.
Employees who believe their company is concerned about their well-being decreased year over year, from 63% in 2021 to 57% in 2022. 52% of people experiencing financial stress believe their employer is concerned about their well-being.
While the decline is not enormous, it comes at a wrong moment for businesses struggling with The Great Resignation. Most workers seeking to quit their positions – six out of ten – are financially stressed, placing the onus on companies to recognize the issue and implementing financial wellness benefits to assist them.
“More than ever, workers are focused on consolidating debt and boosting their savings – and Salary Finance is assisting them in doing so,” Macklin added. “According to a separate customer study, three-quarters of workers who use Salary Finance reported lower financial stress; moreover, those without emergency reserves fell from 78 to 38 percent, while those who are behind on payments decreased from 50 to 19 percent. These advancements demonstrate what is possible when firms educate themselves about their workers’ financial stress and implement the appropriate tools to assist them in achieving their financial objectives.”
The paper, which is available for free download here, also contains perspectives from The Motley Fool Foundation on the barriers to long-term wealth accumulation and Brella Insurance on healthcare expenditures and medical debt.
Concerning Salary Finance
Salary finance promotes working Americans’ financial health by increasing workplace access to socially responsible financial solutions. When workers have access to good credit, pay off bad debt, and improve their savings, they are more satisfied and productive at work and are more likely to attain long-term financial security. Employers get no-cost benefits from increased retention and engagement. Our award-winning digital platform allows us to provide more accessible financial solutions, including high-interest savings accounts, cheap credit, and tailored financial education. Salary Finance is a business partner of United Way Worldwide and works with over 600 of the world’s largest companies. Salary Finance is a Founding Member of the Senior Leader Network of Conscious Capitalism and a member of the American FinTech Council.